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Comment by creaghpatr | Hacker News Reader

Interestingly, the Miami housing market outlook for 2019 is excellent, in spite of this news.

https://gordcollins.com/real-estate/miami-real-estate-foreca...

It would appear that people who actually have skin in the game believe otherwise.

Markets are great for short term simple extrapolative prediction. At long term and/or non-continuous prediction they seem to have had significant failures.

Citation? There seem to be cases in high technology where the market is very patient for long term returns. Case in point: AMZN trades at a 320 P/E because the market (thus far correctly) can’t see a plausible scenario in which it cedes any e-commerce or AWS share.

Maybe this is optimism bias writ large? Another possibility is that even if there is robust demand despite certain destruction, these houses are really worth many millions for the short term (for cachet, status, etc.). Here we model them as really expensive vacations.

> very patient for long term returns.

High P/E in the case of AMZN is not measure of long term. It's measure fo fast expected growth, low interest rates, shadow margins, and general short therm overconfidence.

It took 10 years for AMZN stock to recover from the peak of 1999 crash. There was nothing wrong with the company, markets just didn't want to wait.

Ten years is not the long term.

It’s still the best predictive tool that we have as a species.

It's fascinating, I remember during the runnup to the housing collapse where folks kept bidding up the housing like it could go up forever.

Maybe folks think they'll be able to get out before the collapse, or some new tech will save them from being underwater?

You also can't discount the (depressingly) massive number of people who believe that climate change is a hoax/conspiracy by… someone (used to be China was the favorite boogeyman, but not sure who they're blaming now)… to do something or other that would in some fashion hurt the USA. It may very well be that people are buying out there under the assumption that nothing is going to change at all and that all the flooding is either just a fluke, or else won't ever get any worse than it currently is.

how do they say in the trading world ? don't be the last basket ?

Different timescales.

Sealevel rise projections range from 0.2 meters to 2.0 meters by 2100. Typical mean projection is less than 1.0 meters by 2100. Things get gradually worse, but it takes time before it affects the property values with full force.

Property investors and developers operate on timescales between 5-30 years, there is plenty of stuff to sell before demand starts to decrease.

Exactly. I recently looked at a landlease apartment for sale in NYC. Even if the landholder doesn't renew the lease in 27 years (not typical), based on my very simple model, the ROI on the apartment is enough that you are making nearly 100%. So even if the apartment has no return after 27 years, you're still fine. Obviously, you're better off if there is some residual value in the property after but you don't necessarily need a 50-100 year time frame to realize a decent return on real estate.

And how many of them are so old that there is a good chance they will not live to see the flood? Long-term climate change looks very different when you only care about the next 10/15 years. One way or another, by the time it happens your condo wont be your problem.

It is possible that they think otherwise exactly because they already have skin in the game.

Variant on sunk-cost fallacy?

Humans are notoriously bad at actually predicting the future. People can have all kinds of reasons for wanting to live there and it can be much easier to put blinders on about hard-to-understand problems than to rearrange your entire life to address some seemingly "hypothetical" problem that is supposed to occur at some undetermined future date.

Don't worry. The American tax payer will cover the banks' losses if Miami goes under. Not sure about the homeowners, but I'm sure the banks will continue to have their losses socialized.

I've mentioned this before: the market believes that, once the problems in Miami become undeniable, there will be some colossally expensive engineering megaproject to fix it on the taxpayer's dime. And depressingly, the market is probably right, because to not do this would mean having to abandon a major city-- something that has basically never happened in the modern word, apart from disasters like Chernobyl-- and admitting that climate change is real. So in a decade or two look forward to what amounts to a huge bailout and upward wealth transfer to Miami real estate barons.

It's probably a lot simpler than that. Most of the debt held by banks is probably due to be repaid in <= 30 years. If they'll still make such a loan today then it's reasonable to infer that they don't think property values are likely to go down significantly over that time period.

From their perspective, any kind of government bailout would be great, but certainly can't be counted on. This is especially true of engineering projects, where physical reality puts hard limits on what is and is not possible before even considering costs. Printing money a la quantitative easing is trivial compared to building a giant seawall or what have you.

Or they think they can still sell up before it crashes.

Great point, and the dismissive responses to your comment are revealing. So many hyper-rational, super-duper forecasters on HN who think they know better than the people who, you know, have actually succeeded enough in life to be placing these expensive real estate bets.

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