All right. Today we're going to talk about whether or not Huntsville's in an economic bubble. It's something Megan and I talk a lot about. We hear about it from a lot of other people.

So Megan, I'm going to ask you, is Huntsville in an economic bubble? Well, I would have to say no. In the traditional sense of what they're talking about in terms of an economic bubble, when people hear that, they think gold rush.

They think something that's going to pop. And I don't see that as where we are. Okay. So, you don't think Huntsville is an economic bubble?

I'm going to say we are but in a different sense too, right? In the sense that we are insulated from a lot of things that happen in the outside economy. Huntsville's immune to some of those.

Yeah, I mean and that is absolutely true. And in that, but anytime an area is growing and performing well, it means that it is in some way protected or doing something differently than the areas around it. And yes, in that way we are in a bubble, but it's a more positive bubble than say a gold rush where everybody rushes in for one specific thing and when that thing is over they're out.

Yeah. And I hear people say that like without the federal spending you guys would be nothing. Hey, they're right. Yeah.

But what people often overlook is that these things are almost like endowments, right? So there's these appropriations that go out and they're multi-year. So when some organization in Huntsville, be it a prime contractor, subprime contractor, they're going to get paid out over three, four, five years, this money is already appropriated for those things.

And there are times of when they get paid based on what milestones they hit. And a lot of people don't realize that. They think it's a faucet that can be turned on and off annually.

Yeah. And when we look at specifically space command. People is that about so space command's coming here over the next five years and this summer we've been pretty busy with space command people and so have a lot of other people and we're seeing it in the local economy. But this is just the first phase and it's actually the smallest phase and each summer it's going to double in terms of how many people they're bringing in.

And then once they're all here, they live here, they're working here, and that is like a great number of affluent people spending money in the economy who live and work here. And a lot of those people will stay and then space command will continue to hire and exist in this area. Absolutely. So you have the federal agencies and the military, right?

Like the FBI is another great example. They've been coming here for over a decade. Yeah. And they're still coming, right?

And so we're getting more and more people annually. And I know I work with several folks from the FBI every year. We've already worked with quite a few people from space command and that's going to continue to increase as you said.

But then there's also the private sector. When you're looking at these big government contracts that come out and in some cases are multi-billion dollars, those aren't like annual. They go for three, four, five years and there's a payout structure based on performance.

And of course, these huge government contractors, they're not going to miss those performance numbers. Otherwise, they wouldn't exist. And so you wind up with effectively like a local economic annuity, you know, coming from the government towards these.

Yeah. And I kind of think of it as, you know, we look at the United States, we look at all the major cities like New York and San Francisco. These are cities that were built on ports, right? And that was their driver.

And for a long time, that was really the only thing. We can almost think of the Arsenal as a port in the middle of the country because it's bringing people here and it's bringing business here and it's fueling our economy, but not in a quick flash way, but in a sustainable long-term way. Yeah, I agree. And we have hit like this what I'm going to call critical mass, right?

Yeah. You go all the way back to Operation Paperclip right after World War II where we brought over all the German scientists to build out our rocket program, right? And there was a big boom, right? Then things kind of tapered off over the years.

But over that period of time, there was a slow build on the arsenal of the capabilities and the companies and over in Research Park. And in the last 5 years, that's just exploded. And it's building upon itself year over year over year to the point where space command came here.

Now, I know there's a lot of political back and forth on that, but from a standpoint of capabilities local, we obviously have those people, those brains, those companies here to support that command and that's why it's here. And that is just indicative of what was already here and what's already been built over the last 5 years. And so that just, you know, I don't want to say it future-proofs us, but we're never going to stop sending things into space.

And that's just ramping up right now. And then unfortunately, you just see a lot of military conflicts all over the world. And you don't people don't realize how much munitions testing is done here, too.

Unless you live close to the Arsenal, then maybe you're well aware. But yeah, and like I said, we're the next phase of what this country and the world is doing is space. And we are on the forefront of that.

We're like a port for space. Absolutely. It's really interesting. Like you go to a kid's birthday party and people are talking about like, oh yeah, you know, anti-missile or anti-missile missiles are also anti-satellite missiles.

Here I am the realtor, right? Or this is the kitchen. And you know, we got people over here talking about, you know, shooting down satellites.

So it's a really interesting world that we live in with the brains that are here. Yeah. And also when people start talking about a bubble, they usually in their mind they're thinking that they're at the peak of something and I even though, you know, when I first moved here the average price was probably in the 150s for a house and now it's in the 350s and that is huge and it's really hard for locals who aren't in that, you know, in the space industry. You know, there's a divide here and that affects people.

But I still think that we are at the beginning of something and not at the end of something. It's still it because there's still so many people moving here and it is easy to see that growth and be like there's no way that this could go on and think that your bubble is about to pop just because you just the pressure, you know. But just because it's grown fast doesn't mean it's done growing.

I would 100% agree with you. Right. So you never want to come in and be the last one in, right? Because then you're holding the bag for everybody before you.

You're what you paid is now their equity, right? And so definitely people have those concerns, right? Am I coming to Huntsville too late?

And I would say absolutely not. Like the growth trajectory is just off the charts. We're one of the fastest growing cities in the country and we're going to continue to for those same reasons we just talked about.

But it's beyond that. It's not even just the government now, right? Like we're starting to see all these private sector companies come in that are really pushing up the local economy as well.

And that's what happens when you bring in a bunch of smart people with money to an area and then they like that area because the quality of life here is very nice. The industry starts to be self-perpetuating and it starts to branch out and you start to have a real urban environment and that's what we're seeing for sure and that brings in a lot of different service jobs. If you go through downtown Huntsville and you look at the number of hotels that are here, you'd be staggered by it for a city our size.

But what people don't realize is with the Arsenal and Research Park here, how many symposiums are held here? How many people that are sea-level executives with different companies around the world come here to meet with people in the Arsenal or at Research Park? And you need those higher-end hotels, those things that are central to the city to absorb that, right?

And when we have these symposiums, thousands of people come and you know, it's but so that's again government. It's feeding into the service center, but now that's bleeding over to like NCAA stuff and high school tournaments going on like statewide and you're seeing more and more of these things branching out from federal government spending and starting to support other levels of the economy. Yeah. And you know, when you talk about a bubble also, you're talking about a place where the only reason anybody would live there would be because of this specific thing.

And the quality of life here is really nice. The climate's really nice. Your access to the outdoors is wonderful here.

People enjoy living in this area. And for that reason, it doesn't make sense to call it a bubble to me. I agree. And then like you said, there's runway for housing prices, for economics.

You know, it feels expensive compared to what it was 3, 4, 5 years ago. 100%. Right.

To your point, you know, a few years ago, 150 was the floor. Now, you know, let's say 300's kind of the floor compared to other areas around the country. Like, that's going to get you a three-bedroom, two bath house, even a new build, right?

It's going to be bleach white. You're going to have all the bells and whistles, but it'll be a nice house, standalone, single family. Versus, you look at other parts of the country, that same house, you're lucky if you can find it at 600.

I was looking at stuff online today and it was like 600 got you a one bed, one bath, 480 square foot effectively apartment in some of the very cities that people move here from. Yeah. And so that means that you can come here if you're already a homeowner and really do well basically transferring your situation to here and taking the equity from your other house and then you're still maybe you were at the end of the bubble there but here you started anew and so you are once again building equity and in a situation where you're going to come out very good long term. Absolutely.

And that shows the runway that you have, the delta between where you are now and what it costs to live here. It's just really important. And people don't realize that there's so much room to run for Huntsville that and the surrounding areas.

We're really I'm not going to say we're at the beginning, but we're certainly nowhere near the end. I would say we have just gone the first bump, you know, and when you have the first bump, a lot of people are like, "Whoa, get me out of here. This is crazy. Get me off this roller coaster." And now we are and you talked about the long-term contracts and how you can sort of plan because you know that for the next 5 years, Space Command is coming here.

We have this built in. So we know that even if everything falls apart, we have contracted people coming to Huntsville over the next 5 years for sure. And this was a little bit surprising to me how some of those contracts work out.

Right. So in researching for this episode because it explains something you and I talked about last November, which was why was our housing market still so strong despite the government shutdown. What it turns out is some of these contracts and many of them the money's already put into a pool and it's continuing to pay out even during the shutdown so long as the contractor continues to fulfill their obligations and that money can go on for a quarter, a half year, a year even if the government was shut down.

Yeah, and you know, in terms of the housing market, a shutdown can feel like a little bubble bursting, especially if you're a seller, because that can really take the wind out of your sales there. But we need to keep in mind that when these happen, they are temporary and that our housing market recovers really well from them. It does.

And it's a mix of things, right? So, you and I were surprised by how strong the October, November, and December markets were, right? We saw growth across all of them.

We actually saw a bit of a slowdown in January, which is typical anyway. But, you know, that was kind of that delayed effect there. And I had people that I was talking with in August of last year about moving here with a federal job.

They got impacted by the shutdown. And we're going to close on their house in a week and a half. They had somebody else's exact same time frame again impacted.

We closed last January. Yeah. So, like look at that.

That's like a you know what, seven-month spread between when two people who were impacted by the same event would be able to close on a home transfer for their jobs. And that is something to look at is we see things getting delayed and pushed back because of the nature of government shutdowns and delays and things like that. But there's still a ton of people moving here.

And you know, summer in Huntsville for the real estate market is a kicking little time. It's busy here. Absolutely. I mean, you and I every time we talk, we like we're surprised we have a breath to mention things to each other.

We have to carve out time to have these podcasts. Yeah. Especially this time of year, but you know, so kind of back to what we're talking about though is when we look at the bubble, right, it does feel like it could be pierced when there is a shutdown. To your point, we're pretty quick to recover as soon as that comes back because everybody gets their back pay almost instantly.

We're back up and running. A lot of people are still going to work anyway. Like you would love to see traffic drop during a shutdown but it doesn't even drop that much.

So where it does impact people though an immediate impact are in that service industry or in the service industries you know whether it's the hotels but really the restaurants the shops things like that are what are most impacted. Yeah. And but I don't think that necessarily makes it a bubble because that's the nature of an economy is peaks and valleys. The economy is never just one steady stream of upward mobility forever.

It's well known that in order to have a capitalist economy, it goes up and down and that's what we're seeing and that's just normal. That doesn't make it a bubble. Yep. No, I agree with you, right?

If you look at individual data points, you see volatility. If you look at it over time, there's a trend line that's up and to the right and we're just at the beginning of that. So, I would say yes, we're in a bubble as far as like we're insulated from a lot of what goes on in the economy.

We're also yes, we're in a bubble in that there are like very direct pointed things that can pop us for a short amount of time. Yeah, even those pops though don't feel like a full burst. Like we said, we saw an uptick in housing in October and November when the government was completely shut down, although we did see negative impacts on the service industry.

Yeah. And the other thing about not being in a bubble is that we're experiencing sort of a traditional like cyclical economy. So if you decide that you're going to buy a house and think you're going to make great money selling it in 18 months, that very well might not happen. It's very unlikely that that'll happen.

In fact, you need to hold on to your property for an amount of time that makes sense or you're not going, you know, if you can't just turn and burn these houses and expect to make a profit. Yeah. I think 2020 2021 really changed people's mindset about how quickly homes appreciate. Yeah.

And I'm sure there's places around the country that still see rapid appreciation like that. While we're still on an upward trajectory year-over-year, our average median home price increases every year, it's not that 20% a year like it was, 10% a year like it was. It's going to take you a minimum of three years to be able to recoup selling expenses on normal appreciation here.

And that's an average. 50% of people, let's say it's a median, 50% of people won't do that, right? You're closer to five years before that.

And that's assuming there's no economic downturn, right? Not to say while we're insulated, we're not immune to like global and nationwide economics. Yeah. And this is the traditional way that real estate operates.

And if it rose by that much all the time, it would be completely unsustainable and it would definitely be a bubble. Absolutely. And that's the thing, like people their expectations have changed. We're actually in a very normal market here.

You know, depending on where you are in Huntsville, it's two to four months average time to sell a home. Some places significantly less, but those are pockets, right? And there's reasons for that.

But people look at it and they're like, "Well, it's a buyer market." And it's like, "No, it's balanced, right? It's leaning towards sellers but mostly balanced, but that's historically how it's been and so it's just in light of 2020 2021 that people's expectations changed but housing is a really good indicator of the overall economy and so we're a pretty well balanced economy." Yes, we absolutely lean heavy federal, but over the years we've brought in so much other industry.

I mean, we've got Toyota here with two different plants. We've got Polaris. We've got Eli Lilly now, they're investing what was this four to 6 billion dollar building a plant.

We're all going to be skinny. Yeah. And another really big indicator of, you know, a diverse economy where people have money is there's a lot of services and they're not all necessary. There's a store opening up in South Huntsville where you can go make your own candles and pottery, right?

That means people have money to burn. Like if people are saying, "How can I spend the next hour making a pottery bowl and paying someone a bunch of money for that," they have some money and they're ready to spend it for sure. And we're starting to see more interesting restaurants pop up.

We've talked about this before in different parts of town but like my daughters do cheerleading, right? And so their end of year cheer party they went to a beignet cafe, right? And it's like you know 10 years ago like nobody in Alabama could pronounce beignet, right?

At least not on this end of the state. And so to see those kind of things coming in and thriving, right? And you know, not shutting down a month later.

Like we just got our own Korean fried chicken place, which is like totally like a guilty pleasure for me. Like I'm going to be able to keep that place open on my own, but you know, I've wanted one of those for the whole seven years since we moved back from Virginia, right? So I'm starting to get in these things that were on my dream list of when we moved back and they're starting to show up, right?

And it is because that economy is growing and it balances it out. Each layer of this adds more balance to the scales. Yeah, there are a lot of people here and a lot of them have very good jobs and that means you can have one of these urban type environments where you have all kinds of stuff that you can go do and experience.

Yep. For sure. One thing that I don't think a lot of people realize because it was a very slow creep was in the midst of COVID and for the first year or two after the peak there, it was really hard to get staffing for restaurants, for retail. And I can't remember the last time I walked in somewhere and I felt like it was understaffed. You know, it was for a long time you go into a restaurant, even after the six-foot rule was over, a third to half of that restaurant would be unseated because they didn't have enough servers or enough cooks or what have you to serve it.

And now I can't think of the last time I saw that. Yeah, that's over. That's definitely over and has been for a while. I remember being in the airport and having half of like all the shops were closed at the Atlanta airport after COVID.

But yeah, I think I don't know if I'm pretty sure it's over in most of the country, but definitely in Huntsville, we are I would say booming in terms of the service industry at this point. Absolutely. But it's nice, like you walk in, we never have that long of a wait here. Like it's pretty rare.

If somebody tells you it's an hour, it's really 30 minutes. If they tell you it's 30 minutes, I'm not waiting in. Honestly, I would never wait an hour.

Well, when I lived in Northern Virginia, an hour was a good weight on Friday or Saturday, right? Yes. If there's a place next door I can be at. Yeah. You would just plan your trip.

You go somewhere where there were multiple things. So, you could get on the list and then go do something for an hour and a half and come back and still wait 30 minutes. Versus here, if they tell you an hour, it's 20 or 30 minutes.

If they tell you 20 or 30 minutes, you're about to get seated. So, but it's, you know, for a long time there though, that wasn't true because there were just so few people in the service industry. And so we've seen that comeback and I think that's a large part of so many people moving here, right?

What we do is effectively service, right? My wife was a government scientist when we moved here. That's why we moved here.

That was what her job was at the time. She's still with that same organization, different role, but I was not in the government and I didn't really have a skill set the government was looking for. And so having a background in real estate, I was able to join a brokerage here and eventually open my own.

But that's just like one example of how many times has this happened in the thousands of times over the last 10 years where one member of the family comes in to take a government job or contracting job and other members of the family move into the service industry or professional services. Yeah. I see that a lot here too. And it builds because you'll have, you know, a spouse maybe start a business.

There's a lot of independent businesses that you see popping up around here, people having an idea and making it happen. Yeah. And I can speak from personal experience. It's ridiculously easy to open a business here.

I was shocked at how easy it was. I mean it is like you can just do a quick Google search "how to open a business in Alabama." No, it's true.

I know somebody who sells candles at farmers markets and she's like, "I started a business yesterday," and I was like "what?" and she's like "yeah it took me an hour." Absolutely right. So it's easy peasy. So that's part of why we see it.

It's a very business-friendly environment, not only from a regulatory standpoint and paperwork, but also from a tax standpoint. Yeah. And I think it's a business-friendly environment across the board and that's why you see even with larger businesses, they're being courted. That's why we see these big companies moving into the area because they make it very advantageous for them to be here.

Absolutely. And there's a lot of dirt to build on too and compared to other areas, it's relatively inexpensive. So, if they're going to expand somewhere, there's a lot less cost to do it here. Brilliant. All right.

Well, I think we covered whether or not we're in a bubble. So, we are not in a bubble. Well, we're in a low bubble.

We're in a healthy sphere. A bubble-icious is what we're in. So, we're in a bubble if you mean insulated from the outside.

We're not in a bubble if you mean we're going to be pierced and, you know, popped in the next six months. Absolutely. All right. Thanks for watching, guys.

Thanks everybody. Thanks for watching or listening. You can always catch us on audio on wherever you get your podcast, be it Spotify, Apple, or you can watch our video on YouTube.

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