In a changing economic climate, it can be hard to know next steps. What’s our role? How does Florida stack up to other areas of the country? In this article by Bank of Central Florida president David Moore, we can learn how to take advantage of Florida’s enviable economic position by being prudent and cautious in this environment. 



“Laissez les bons temps rouler,” is Cajun for “Let the good times roll.”

 

How is that possible with turbulent inflation, a hawkish Fed and a European War?

 

It is time to exercise caution.

 

When the cost of goods and services increase at a faster pace than wages, it’s time to cut expenses.

 

When we say, “Interest rates are going up,” we mean the amount a buyer can spend on a property is going down – because more of their allowable payment goes to interest. It’s time to prepare for asset devaluation.

 

This will lead to a reduced amount of demand and increase the supply of real estate, allowing for a more balanced real estate market.

 

This is happening, today. This will lead to a recession. We may be in one today (Q1 GDP was -1.4% this year). Technically, two consecutive negative GDP quarters is a recession.

 

We consider this “good times”? We believe so. 

It helps purge our economy. It takes speculators out of the market and it right-sizes asset values. If you happen to live in a place like Florida, where the population has grown by 1,000 people per day, the chance of real recession pain is lessened, because excess demand still exists.

 

For most of the country, the chicken that is the lax monetary policy of the past 10 years will be coming home to roost. Unemployment will rise as companies begin to cut expenses, leading to more foreclosures and greater asset devaluation. Without a net positive migration of people (California, Illinois, New York), decreased demand will lead to higher supply which will lead to lower prices, which in the end, is good.

 

In Florida, we will see a slow-down, and we should. We won’t continue to see 1,000 people a day moving here.  However, the million people that have moved here over the last three years have created significant demand. Demand that supply has not caught.

 

So, as the rest of the country hunkers down, we still have a back-log of demand to meet. That’s good. It will sustain us as the spigot of economic prosperity slows down elsewhere.

 

This slow-down will help us to absorb this population growth by fixing our infrastructure, stabilizing real estate and rent values, and weeding out speculators.

 

Many of us in the Sunshine State have seen this before. Excess exuberance leads to catastrophic downturns (see Florida Land Booms and Busts during the 1920’s, 1950’s, 1980’s, 2000’s).

 

This time, we can take advantage of our enviable economic position by being prudent and cautious in this environment. We don’t have to experience the busts of before if we recognize the environment and take precaution.

 

So, for now, in Florida, “Laissez les bons temps rouler.”  However, like anyone having a good time on a Friday night, being responsible makes for a better evening, and even better morning. 

 

Read about David Moore