Many Florida homeowners are throwing in the towel on coastal living due to multiple hurricanes and insurance costs. It’s a similar setup in California.
For Sale Signs Surge
The Wall Street Journal reports In a Florida Town Ravaged by Storms, Homeowners All Want to Sell
Kellen Driscoll bought his home here in 2019, settling in the coastal enclave of Shore Acres. It flooded for the first time four years ago after tropical storm Eta dumped more than 3 feet of water.
Hoping it was a fluke, Driscoll tore out the affected drywall and started fresh. After all, the four-bedroom home built in 1960 had no flood history.
But then it happened again, and again. Like many others in the community, he put his home up for sale in the spring of this year. After seeing little interest, he cut the asking price.
On Friday, Hurricane Helene deposited more than 6 feet of storm surge in the neighborhood. The rushing waters ripped the “For Sale” sign off his front lawn, and etched a waterline that reached halfway up his front door, just underneath the doorbell. He reduced the asking price for a fifth time.
“We flooded here four times in the last four years,” said Driscoll, as he threw his television sets, furniture, appliances and other belongings to the curb. “I’m just hoping I can sell the house. It’s a good neighborhood for sure, but dealing with the floods is horrible.”
Ballooning home insurance costs and the perennial threat of violent storms are starting to undermine housing markets throughout much of the state. But in few places has the turnaround been more dramatic than in low-lying communities up and down the coast of Florida that frequently flood.
The Tampa Bay housing market had been softening even before Helene struck. While prices have been flat, the area experienced a 58% increase in supply in August compared with a year ago, and a 10% decrease in demand, according to Parcl Labs, a real-estate data and analytics firm.
About half the homes listed for sale in Tampa experienced price reductions as of Sept. 9, the third highest share of all U.S. major metropolitan areas.
“Tampa was already heading in this direction before the hurricane hit,” said Jason Lewris, co-founder of Parcl Labs. “This hurricane may compound the market dynamics that have been occurring there over the last few months.”
The area’s affordability, once a large part of its appeal, is also waning as insurance premiums soar. Jacob McFadden was paying $880 a year to insure his home when he bought it in 2020. That amount has since almost quadrupled, to $3,300.
“I don’t know how much longer I’m going to do this waterfront living,” McFadden said, standing in front of his home with a wheelbarrow and his home’s contents scattered around the front yard. “This may be the end.”
Surging Insurance Costs California Style
Also consider That Luxury Home Comes With an Ocean View—and Surging Insurance Costs
Ryan Harper and his wife decided to sell their Santa Clarita, Calif., mansion last year after the insurance premium on it nearly tripled. An exodus of home insurers from the state had left them with a state government insurance policy, as well as a supplemental private one, that cost more than $7,000 a year.
The Harpers listed the six-bedroom Spanish-style home, which had been labeled fire-prone by the state, at $1.25 million. Months went by with little interest. For the handful of potential buyers who did emerge, insurance costs would often come up as a concern. The couple dropped the price by $75,000, then took it off the market.
“To sell a home in California right now seems almost impossible,” Harper said. “The insurance market is crazy.”
Insurance companies have increasingly sought to spread out that increased risk across a greater number of homes, according to Porfilio. Some would rather insure four $250,000 homes than one $1 million home, for example. That has forced more luxury homeowners to go to specialty insurance companies that are less regulated than the rest of the market, he said.
“I’ve gotten calls where people are incredulous” about the rise in insurance premiums, said Paulette Koch, a Palm Beach, Fla.-based luxury real-estate broker at Corcoran Group. “It’s part of the cost of living here.”
Katja Pekrun said she plans to pay off the small mortgage on her $1.2 million home in Menlo Park, Calif., “as quickly as possible,” in part to avoid expected increases on her $2,200 insurance premium.
“Then I might go without home insurance because it’s really too expensive,” she said. “It’s totally insane.”
What’s insane to me is living in hurricane, flood, fire, and mudslide zones. Some might consider no insurance the “totally insane part”.
Meanwhile, home prices keep rising, With rising replacement costs and labor costs, insurance rates are sure to follow.
Yet Another Record High for Case-Shiller Home Prices
On September 28, I noted Yet Another Record High for Case-Shiller Home Prices
The recently released Case-Shiller national and 10-city home price indexes hit new highs for July.
Have Home Prices Peaked?
I suspect so nationally, and certainly in Florida.
The Case-Shiller indexes are quite lagging. The most recent data is July, and that represents sale n May, June, and July.