Florida and Texas real estate investment outlook from Wall Street’s Dr. Doom

Top economist Nouriel Roubini has a message for all New Yorkers who have moved to Florida during the pandemic: When it comes to real estate investment, you should have chosen the Midwest instead.

Roubini, a New York University economics professor and CEO of Roubini Macro Associates, correctly predicted the 2008 financial crisis and nicknamed himself “Dr. Doom” for his pessimistic views.

He predicted that the US would fall into a deep recession by the end of the year and called “delusional” anyone who still thinks a “soft landing” is possible. He has also warned that an era of “major stagflationary instability” is upon us, with “massive bankruptcies and cascading financial crises” around the world in the coming years.

He recommends real estate as a hedge against inflation, but makes a caveat about climate change.

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On Bloomberg’s Odd lots Podcast on Thursday, he warned that “a lot of real estate will be stranded because of global climate change … People have foolishly moved from New York to Miami and from San Francisco to Austin, but Florida will be flooded and Texas will be too hot to survive.” ”

Tens of thousands of New Yorkers relocated to the Sunshine State during the peak of the pandemic, and many continue to do so.

“These are people who are moving to South Florida to start their lives, to send their kids to school, to start a new business,” South Florida real estate agent Bonnie Heatzig told WABC-TV in New York in July 2021 . “These people are here to stay.”

Florida real estate for the long term

But, Roubini said on the podcast, “There are literally maps showing that over the next 20 years, half of the United States will either be coastal waters, or too hot, or droughts, or wildfires to live in.”

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“So,” he continued, “there’s going to have to be massive migration from the South and from the coasts toward the only part of the US that’s going to survive climate change.” [which] the Midwest is essentially Canada. So there will be trillions of dollars of real estate assets to be damaged by what is essentially global climate change.”

He still recommends real estate (but only in certain locations) to investors, along with short-dated government bonds, inflation-linked bonds, and gold and other precious metals, as “assets that will protect you against inflation, political and geopolitical risks, and environmental damage.”

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Real estate, he added, is “a good hedge against inflation as long as monetary policy is not very restrictive.” Of course, the Fed has hiked interest rates, which has helped REITs, or real estate investment trusts, perform poorly this year. But, he said, the Fed is likely to “dodge” those hikes, and given that, “I think real estate will outperform stocks because they’re inherently a kind of fixed-supply asset, that’s in the short-term.”

However, with climate change, “you have to find the assets in the right parts of the United States,” he said.

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