Major bank flags southern US city as the world’s biggest real estate bubble risk, as metrics top 2006 housing levels

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Florida’s housing market boomed during the pandemic, as Americans flocked to the Sunshine State in search of warmer weather, lower taxes and more space. But that surge has now pushed one of its biggest cities into dangerous territory: Miami has just been ranked the world’s most at-risk housing market.

UBS’s newly-released Global Real Estate Bubble Index placed Miami at the top of its list, assigning it a bubble risk score of 1.73 — well above the threshold of 1.5 that signals “high” risk. (1) That puts the city ahead of famously-overheated markets like Los Angeles, Toronto, San Francisco and New York.

The index tracks metrics such as price-to-income and price-to-rent ratios, construction activity and mortgage rates. In Miami, affordability for buyers has fallen to near record lows, yet home prices continue to diverge sharply from rents.

“Over the past 15 years, Miami has posted the strongest inflation-adjusted housing appreciation among all cities in the study,” UBS wrote. “The current price-to-rent ratio has surpassed even the extremes of the 2006 property bubble, signaling a high bubble risk.”

What followed that mid-2000s bubble was a collapse that wiped out trillions in household wealth, triggered a wave of foreclosures and set off the worst financial crisis since the Great Depression.

The study noted that Miami’s housing inventory has climbed back to near pre-pandemic levels, while regulatory changes are forcing many condo associations to finally tackle decades of deferred maintenance, saddling owners with hefty repair bills. On top of that, insurance premiums are surging, driven by mounting environmental risks such as flooding and hurricanes. These combined costs are prompting more owners to sell, adding to the pressure on the market.

Still, UBS doesn’t foresee a repeat of the 2008 meltdown.

“While price growth is expected to turn negative in the coming quarters, a sharp correction appears unlikely at this stage,” the report said, noting that Miami’s coastal appeal and favorable tax environment continue to lure newcomers from around the country (Florida does not impose a state income tax).

One reason people gravitate toward real estate is its reputation as a hedge against inflation. When the cost of living rises, so do the prices of materials, labor and land — and that often pushes home values higher as well.

But with fresh warnings about a potential housing bubble, it’s worth remembering that real estate isn’t the only shield against inflation. For generations, investors also have turned to gold as a time-tested store of value.

Gold’s appeal is straightforward: unlike paper money, the precious metal can’t be created at will by central banks. It’s also considered the ultimate safe haven — untethered to any single country, currency or economy. In periods of market stress or geopolitical turmoil, demand for gold tends to surge, often driving prices higher.

Over the past 12 months, gold prices have climbed more than 40%.

Read more: 30% of US drivers switched car insurance in the last five years. Here’s how much they saved — and how you can cut your own bills ASAP

Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, recently highlighted gold’s importance in a resilient portfolio.

“People don’t have, typically, an adequate amount of gold in their portfolio,” Dalio told CNBC. “When bad times come, gold is a very effective diversifier.”

One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Goldco.

Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, thereby combining the tax advantages of an IRA with the protective benefits of investing in gold making it an option for those looking to help shield their retirement funds against economic uncertainties.

When you make a qualifying purchase, Goldco will match up to 10% in free silver.

While housing markets can overheat, not all real estate moves in lockstep. Some sectors provide more stability — especially those tied to everyday essentials. After all, no matter what’s happening in the broader economy, people still need food, household supplies and basic services.

That’s where grocery-anchored commercial properties come in. These are shopping centers built around a major supermarket chain, often paired with pharmacies, clinics and other daily-needs retailers. Because grocery stores tend to generate steady traffic even during downturns, the surrounding tenants benefit from consistent footfall — helping keep occupancy and rental income resilient.

Of course, these properties come with hefty price tags and are usually the domain of institutional investors, but new platforms now make it possible for individual investors to gain exposure with modest upfront capital.

First National Realty Partners (FNRP), for instance, allows accredited investors to diversify their portfolio through grocery-anchored commercial properties, without taking on the responsibilities of being a landlord.

With a minimum investment of $50,000, investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities. Thanks to Triple Net (NNN) leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into their potential returns.

Simply answer a few questions — including how much you would like to invest — to start browsing their full list of available properties.

At the end of the day, everyone’s financial situation is different — from income levels and investment goals to debt obligations and risk tolerance. If you’re unsure where to start, now could be the right time to get in touch with a financial advisor.

With Vanguard, you can connect with a personal advisor who can help assess how you’re doing so far and make sure you’ve got the right portfolio to meet your goals on time.

Vanguard’s hybrid advisory system combines advice from professional advisers and automated portfolio management to make sure your investments are working to achieve your financial goals.

All you have to do is fill out a brief questionnaire about your financial goals and Vanguard’s advisers will help you set a tailored plan and even help you stick to it.

Once you’re set, you can sit back as Vanguard’s advisors manage your portfolio. Because they’re fiduciaries, they don’t earn commissions, so you can trust that the advice you’re getting is unbiased.

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UBS (1)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.