Chief Economist Nouriel Roubini has a message for all New Yorkers who moved to Florida during the pandemic: In terms of real estate investing, you should have chosen the Midwest instead.
Roubini, an economics professor at New York University and CEO of Roubini Macro Associates, correctly predicted the 2008 financial crisis and earned the nickname “Dr. Doom” for his pessimistic views.
He predicted that the United States will fall into a deep recession by the end of the year and called “delusional” anyone who still believes a “soft landing” is possible. He also warned that an era of “great stagflationary instability” is coming, with “massive insolvencies and cascading financial crises” around the world in the years to come.
He recommends real estate as a hedge against inflation, but he offers a caveat when it comes to climate change.
At Bloomberg odd lots podcast on Thursday, he warned that “a lot of real estate is going to be locked up because of global climate change…People have been mindlessly moving from New York to Miami and from San Francisco to Austin, but Florida is going to be flooded and Texas is going to do too hot to survive.
Tens of thousands of New Yorkers moved to the Sunshine State at the height of the pandemic, and many continue to do so.
“These are people moving to South Florida to start their lives, to put their kids through school, to start a new business,” South Florida realtor Bonnie Heatzig told WABC- New York TV in July 2021. “These people are here to stay.
But, Roubini said in the podcast, “literally, there are maps that show that half of the United States over the next 20 years will either be under water on the coasts, or too hot, or droughts or forest fires, to live there”.
“So,” he continued, “there will have to be massive migration from the South and the coasts to the only part of the United States that will survive climate change, [which] is the Midwest in essentially Canada. So there will be trillions of dollars of real estate assets that will be damaged by essentially global climate change.
For investors, he still recommends real estate (but only in certain places) as well as short-term government bonds, inflation-linked bonds and gold and other precious metals as “assets that cover against inflation, political and geopolitical risks, and environmental damage.”
Real estate, he added, is “a good hedge against inflation as long as monetary policy is not very tight.” Of course, the Fed has raised interest rates, which has helped REITS, or real estate investment trusts, do poorly this year. But, he said, the Fed is likely to “crash” with these hikes, and given that “I think real estate is going to outperform equities due to the nature of a fixed-supply asset, that is, in the short term.”
Given climate change, however, “you have to find the types of investments in the right parts of the United States,” he said.
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