Through the pandemic years and post, America has seen a massive shift in real estate to the south and southeast. Demand sky rocked in places like South Florida, Austin, Texas, and Atlanta, Georgia.
All through the sun belt has seen massive investment, but will that hold in the long run? Although we are not doom and gloom investors here at Above 8 Capital, chief economists like Nouriel Roubini with New York University Economics have exciting perspectives on investments in these areas. Nicknamed Dr. Doom, Roubini has a warning for those investing heavily in the south. As we see climate shift, temperatures rise, and coastlines become more vulnerable, he suggests these areas that have seen massive investment will become liabilities in the future.
Although only time will tell if extreme climate shifts in these markets will drastically affect livability, we do prescribe to the notion that these markets are far more likely to experience bad weather and temperatures that will begin to level and put downward pressure on demand in the long run. Why? It just creates unstainable standards of living where large portions of the personal budget go to energy and home maintenance.
With the long approach to real estate, this perspective indicates that although demand may be trailing, we will likely see another migration shift to the Midwest in the next five to ten years. If this hypothesis holds, the Midwest will likely experience an inventory shortage that will drive home prices beyond the average 4-8% appreciation.
Although this hypothesis is highly speculative, supporting data suggests this trajectory is highly likely. Inbound searches for top locations in the Midwest have turned positive and are growing. Large employers have begun to invest in Midwest communities from Missouri to Ohio. Some of this is due to affordability, but many cite the stability of the climate and workforce availability as driving factors in investing in the Midwest.
Suppose this Midwest renaissance continues in the heartland of America. In that case, it will only continue to pull inbound employees to the area; therefore, the residential real estate market will likely remain strong.
So what are your thoughts? Do you believe climate will affect migration to this extent? Do you think the Midwest will see exponential growth in the next decade? Share your thoughts in the comments below.
Luke Jenkins is a General Partner at Above 8 Capital LLC. The thoughts and opinions in this article are his own and do not reflect the official position of Above 8 Capital LLC.
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