South Florida Economy and Real Estate Market Are in the Eye of a Perfect Storm

Despite uncertainties surrounding the national economy, three major components of the South Florida economy-- tourism, healthcare and financial services—add additional complexity to future economic and real estate forecasts. Any declaration by local pundits of a bottoming in the economy or real estate prices in the near term should be met with skepticism and considered somewhat wishful thinking. South Florida's economic and real estate vitality relies heavily on its ability to import dollars from outside Florida, by attracting out-of-state and international visitors, and by encouraging visitation by longer stay retirees and snow birds for several usually winter months every year. Assumptions about those spending patterns appear as uncertain as any currently facing the national business scene at the moment.

First, Florida tourism has been held hostage by a barrage of tropical storms and hurricanes that have left nowhere to hide for several months every year beginning in 2004. Panic reached a crescendo after an unprecedented 27 named storms appeared during the 2005 Atlantic hurricane season. Some believe storm activity has also interrupted Florida's multi-generational permanent population growth by contributing to out-migration in recent years. And, although storm activity has been quiet recently, many leading climatologists expect robust activity for many years to come.

Second, with one of the most significant senior citizen populations in the nation, it is understandable that healthcare services should provide significant ballast for the local economy. Medical insurance and government-supported programs such as Medicare drive a meaningful share of healthcare spending, so it seems reasonable to expect that South Florida's future economic fate may hinge in part on the outcome of healthcare and medical insurance reform, which may take months, if not years, to be fully realized.

Finally, the financial sector, including banking and wealth management, especially for seniors, is another area with critical unresolved issues. With the assistance of government and other public agencies, the banking sector seems to have stopped short of ruin. However, its future viability still faces significant global economic headwinds and national politics may impose further fate-changing reform and regulation on that sector. Those facts, the reality that personal wealth has dramatically fallen since 2007 and low interest rates conspire to naturally depress senior incomes and wealth management fees, all of which means that the future of Florida's financial industry is tentative at best.