“I’ve just found a room in my house I didn’t even know existed.”
So declared a friend of mine shortly after the 2008 global financial crisis, when he moved out of New York and down to Dallas.
The luxury of his extra space prompted some jealousy, for sure, but for me — and millions like me — there was nonetheless a sense back then that you “just had” to be in New York or Los Angeles.
After all, “trading equities in Dallas” was a major putdown in “Liar’s Poker” for a reason.
At that point, anyway, I just wasn’t up for joining the roughly 500,000 people a year who crossed state lines to live in Texas.
But COVID accelerated that trend further, with people placing a premium on space over style. As cities locked down, the idea of work drinks, museum exhibits or Broadway shows became distant.
The new zeitgeist was “Go to the sun, get some land.”
And so Southern areas “New Yorkified” or “Californicated”: Today, you’ll find nearly as many espresso devotees in Houston as in San Francisco. The penchant for sipping flat whites and keeping designer dogs is no longer the preserve of a “Northern elite.”
As we head into 2024, this phenomenon also created a narrative that the big cities of the North are in a “death spiral,” as people leave and amenities dry up.
But such a descent is not inevitable.
Today, many Americans are in an economic lockdown.
Some 85% of US domestic mortgages are the 30-year fixed type, and some 60% were issued in just the last four years and aren’t likely to be paid off soon.
We’re even seeing divorced couples stuck living together, trapped as captives of their mortgages.
But these factors may not be at play forever.
Bond giant PIMCO puts the chances of a US recession at 50% next year, and the Congressional Budget Office projects a meaningful rise in the unemployment rate to 4.4% by the year end.
As the mortgage-rate “lockdown” unwinds, we may be underestimating New York and its sister cities.
Death spiralists talk about the $1 trillion in assets that left New York, but overlook the many multiples of trillions that remain.
Most of those companies are now saying they do want workers in Gotham to show up in person at least a couple days a week.
The choice can become stark: “Move back or lose your job.”
Meanwhile, many new Southerners are receiving a nasty surprise: Recently Florida insurance premiums rocketed by 30% while the number of “once in 100 years” weather events is on the rise.
And New York has recovered before.
In the ’70s, New York became mired in high crime, high taxation and high rents, and the Sun Belt blossomed.
Companies skedaddled — to the point where then-Mayor Ed Koch, in frustration, called it a “betrayal” when American Airlines moved to Dallas in ’78.
But then something happened.
Local leaders cut crime and balanced spending.
Between the ’70s and ’90s, the top tax rate fell from over 15% to 8%.
Combined with more affordable rents, New York City became a place where exciting things could kick off, and they did.
Today, commercial rents have started dropping, but it’s up to the city’s leadership to stop relying on New York’s brand to bring about a “big return.”
The Big Apple needs to be the city worth giving up that extra room and extra sunshine for.
The creative and cultural lifeblood of New York remains unique.
Yes, the city has taken a few hits recently. And it’ll need political leadership and a willingness to do the things that saved the city before. It doesn’t just happen.
Still, don’t be surprised when it comes back swinging.
Brandon Hollihan was born in Manhattan and is the founder of 3DR partners.
