Lightning Pod: Private vs. Public Schools, Resort Town Hyperinflation, and Real Estate - Ep. 85

In this episode of Financial Planning for Oil and Gas Professionals, hosts Justin Brownlee and Jared Machen discuss their theory on resort town hyperinflation, do a residential real estate heat check, and delve into back-to-school financial topics.

Challenges Faced by Resort Towns and Luxury Vacation Inflation

Resort towns and luxury vacation destinations are grappling with a unique challenge that could result in inflation surpassing that of other sectors of the economy. We dive into how these areas have witnessed a significant surge in prices over recent years, rendering them unaffordable for many. The primary issue highlighted is the struggle to establish the necessary infrastructure to sustain the workforce essential for maintaining these locations.

1. Workforce Shortage: Resort towns often encounter difficulties in attracting and retaining an adequate workforce to support their daily operations. From stocking grocery shelves to providing services at upscale hotels, these towns rely on a large number of employees. However, with housing costs soaring, it becomes increasingly tough to entice individuals to work in these areas.
2. Geographical Challenges: Many resort towns are situated in remote areas, far from major cities and transportation hubs. This geographical isolation further complicates the workforce availability issue. Without a steady influx of workers, these towns find it challenging to uphold the necessary services and amenities for residents and visitors.
3. High Infrastructure Costs: The cost of living in resort towns is often exorbitant, with even basic housing options reaching millions of dollars. This high cost of living extends to businesses operating in these areas, making it financially burdensome to provide affordable housing for employees.
4. Reliance on Wealthy Patrons: The episode mentions instances where ultra-wealthy individuals have subsidized housing for full-time workers in resort towns. This dependence on affluent benefactors to support the workforce underscores the unsustainable nature of the current economic model in these areas.
5. Demographic Shifts: The episode also touches on the demographic trends influencing the demand for resort town properties. With an increasing number of high-net-worth individuals and decamillionaires, the demand for luxury vacation homes is on the rise, further propelling prices in these areas.
   

The challenges faced by resort towns in providing infrastructure for their workforce are contributing to a scenario where luxury vacation inflation may outpace inflation in other economic segments. The reliance on wealthy individuals to subsidize housing and the geographical isolation of these areas pose significant obstacles to maintaining a sustainable economic model in resort towns.

Residential Real Estate

We discuss the current state of the residential real estate market, highlighting its normalization. This normalization is characterized by increased inventory and longer listing times, indicating a shift from the rapid market pace seen in previous years. In areas like Northwest Arkansas and DFW, more homes are being listed for sale, and these homes are staying on the market for longer periods compared to the previous boom period.

Despite the current trend of increased inventory and slower sales, long-term underbuilding and low interest rates may prevent significant price drops in the residential real estate market. The hosts point out that the underbuilding post-08 recession has led to a supply and demand imbalance, with more households being formed than housing units being added in recent years. This underbuilding, coupled with historically low interest rates, creates a scenario where the market may not experience substantial price drops.

The discussion also touches on the impact of interest rates on the housing market. While rates are starting to move down, the hosts note that many homeowners have locked in low mortgage rates, making it less compelling for them to refinance. This situation, where a significant percentage of homeowners have low mortgage rates, acts as a barrier to a flood of supply entering the market due to rate changes, potentially stabilizing prices.

Overall, while the residential real estate market is showing signs of normalization with increased inventory and longer listing times, factors such as long-term underbuilding and low interest rates may act as buffers against significant price drops in the future.

Public vs Private Schools

The decision between public and private schools for children is a complex and highly personal one, as discussed in the podcast episode. There are various considerations that parents need to take into account when making this decision. One key factor mentioned was the desired end product for the child. Parents often consider what type of education and environment will best prepare their child for the future. This could include factors such as academic rigor, extracurricular opportunities, and overall school culture.

Another important consideration mentioned in the episode is the individual needs of the child. Each child is unique, with different learning styles, interests, and requirements. Parents must assess whether a public or private school can cater to their child's specific needs, whether it be academic support, special programs, or extracurricular activities.

Additionally, the potential financial implications of choosing between public and private schools were discussed. The hosts highlighted that private schools can come with a significant financial burden, often requiring families to make trade-offs in other areas of their finances. The decision to invest in private education may involve sacrificing other financial goals or opportunities, such as purchasing a more expensive home or saving for college.

The hosts also touched upon the idea of investing in a child's education as a long-term strategy. While private schools may offer certain advantages, such as smaller class sizes or specialized programs, the return on investment can be difficult to quantify. The decision to opt for private education early on, such as in preschool, was mentioned as a potential strategy for maximizing the cognitive development of a child during crucial early years.

Overall, the decision between public and private schools is multifaceted and deeply personal, with parents needing to weigh a variety of factors to determine the best educational path for their children. The considerations include the desired educational outcomes, individual child needs, and the financial implications of choosing one type of school over the other.

As always, we encourage our listeners to reach out with any questions or ideas for future episodes at podcast@brownleewealthmanagement.com.

Thank you for tuning in, and we look forward to bringing you more insightful episodes in the future.

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Disclosure: This information is for informational purposes only. Nothing discussed during this video should be interpreted as tax, legal, or investment advice. If you have questions pertaining to your specific situation, please consult the appropriate qualified professional.