I heard an interesting theory being discussed the other day.
The weather service organizations seem to be telling us that we are in a period during which Florida, and the Southeastern United States, as a whole, will be frequently struck by major hurricanes. This period is predicted to last for approximately another 20 to 30 years.
If you look at real estate values in Florida, the values for property in Miami were very low about 25 years ago, after it had been struck by a series of storms. The bulk of real property appreciation and building in Florida has occurred during the last 25 years. As such, it is possible that mother nature will be the driving force to keep our real property values in Florida lower and more realistic. However, there is the potential that the two or three decades of storms could drive these values below market value, and make them a great investment opportunity. This is good news for young people in Florida who are hoping to one day own their own homes.
Unfortunately, the cost of insuring real property located in Florida now has become ridiculously expensive, and this is likely only going to get worse. In Florida, private insurance companies consider many coastal properties uninsurable. In response, the State created Citizens Property Insurance Corp. to cover wind damage on those high risk properties. Unfortunately, Citizens has its own issues. Its Chief Financial Officer was forced to resign in September over reports that he had been taking kickbacks and two other executives left after it was found that they had been conducting some shady transactions. Moreover, the company was already running a deficit of $516 million from last hurricane season. It was recently recommended that Citizens needs to increase there rates by 80 percent. Ouch.
So while a young person yearning to be a home owner may be able to one day afford the home of his dreams, he may not be able to afford the cost of insuring it.
The weather service organizations seem to be telling us that we are in a period during which Florida, and the Southeastern United States, as a whole, will be frequently struck by major hurricanes. This period is predicted to last for approximately another 20 to 30 years.
If you look at real estate values in Florida, the values for property in Miami were very low about 25 years ago, after it had been struck by a series of storms. The bulk of real property appreciation and building in Florida has occurred during the last 25 years. As such, it is possible that mother nature will be the driving force to keep our real property values in Florida lower and more realistic. However, there is the potential that the two or three decades of storms could drive these values below market value, and make them a great investment opportunity. This is good news for young people in Florida who are hoping to one day own their own homes.
Unfortunately, the cost of insuring real property located in Florida now has become ridiculously expensive, and this is likely only going to get worse. In Florida, private insurance companies consider many coastal properties uninsurable. In response, the State created Citizens Property Insurance Corp. to cover wind damage on those high risk properties. Unfortunately, Citizens has its own issues. Its Chief Financial Officer was forced to resign in September over reports that he had been taking kickbacks and two other executives left after it was found that they had been conducting some shady transactions. Moreover, the company was already running a deficit of $516 million from last hurricane season. It was recently recommended that Citizens needs to increase there rates by 80 percent. Ouch.
So while a young person yearning to be a home owner may be able to one day afford the home of his dreams, he may not be able to afford the cost of insuring it.
Just another reason to move to Wisconsin! Ha! You thought I forgot!
ReplyDeleteK ~ The funny part is when I went to post this I actually expected you to say exactly what you did.
ReplyDeleteJ~ I guess I'm just predictable in that way. So are you gonna???
ReplyDeleteHow is Naples doing?
ReplyDeleteThomas,
ReplyDeleteI hear that it is doing fine. If I lived there, I could tell you more. However, my brief survey of it indicated that it would recover fairly quickly.
wow. i'm actually coming to FL for work this month, and I heard that Palm Beach County was really rocked by Wilma.
ReplyDeleteSub Girl ~ It's not too terrible. There was probably more damage in Broward actually. And there was a decent amount of property damage, but I think the work part was really the destruction of our trees and electrical infrastructure - including all of our traffic lights, which will probably take a year to fully repair.
ReplyDeleteCitizens is also shirking its responsibilty to thousands of homeowners right now under the Mierzwa case--opting instead to ignore the state of Florida law and define its own non-opt out class (Scylla Properties--currently on appeal in the first DCA) instead of paying. Statewide, insurers are pulling back.
ReplyDeleteI wouldn't bet on real estate going down in Florida because of hurricanes; but I would invest in shutters and, if you're going to build near the water, build up. It's not a mater of if, just when.