‘Supply Has Caught Up With Demand’ In Florida
The Sun Sentinel reports housing starts are up in parts of Florida. “Despite all the talk about a dearth of buildable land in South Florida, Broward County recorded an increase in housing starts during the second quarter. Broward had 900 starts, up 54 percent over the second quarter of 2005, according to West Palm Beach housing analyst Brad Hunter.”
“‘I don’t know specifically what explains it,’ Hunter said. ‘But land is scarce, that story hasn’t changed.’”
“Broward has 2,724 finished vacant homes and homes under construction, which represents a 16-month supply of inventory. In other words, that’s the amount of time it would take to fill up those homes if no others were built.”
The St. Petersburg Times. “Only half as many homes were sold in Pasco County in the first six months of this year compared with the same period last year, figures released Tuesday by the county’s property appraiser show. For the first time in five years, the county’s median home sale price inched down.”
“Meadow Pointe, Ballantrae and Wilderness Lake Preserve still rank among the top 10 communities for ‘housing starts’ in the Tampa Bay area. Pasco’s annual figure for housing starts through May still shows 14 percent growth.”
“‘Supply has caught up with demand,’ property appraiser Mike Wells said. ‘When that happens, sellers have to become realistic, and what they’re asking for their product. The investor has moved on. I do think that builders are probably competing with investors that they sold houses to a year ago.’”
“As prices soften, market watchers say investors are getting burned off. The number of investor homes is difficult to quantify. About a third of Pasco homes are listed as nonprimary residences. Wells said that number has grown to 30 percent currently.”
The News Press. “Two out of three Floridians live in areas so risky that State Farm and regulatory loss models conclude rate increases of more than 50 percent are needed to cover losses. Realtors say Florida’s housing market is suffering. Reports last week showed single-family home sales in June were down 29 percent from 2005, off by as much as 48 percent in Naples.”
“Combine inflated home prices with tripled insurance premiums, and, ‘My gosh, your first-time homebuyers are priced out of the market,’ said Pensacola broker Dan Gullahorn.”
“Rather than pay a $2,300 insurance bill, Harold Cameron has put a ‘For Sale’ sign in front of his St. Petersburg home. He says he’ll head to Georgia, where Social Security is more likely to cover the cost of living. ‘This was going to be my home when I moved here 23 years ago, but I’m not going to suffer that kind of a loss,’ Cameron said.”
The Miami Herald has this roundtable discussion. “Dulce Suarez-Resnick: ‘Some colleagues in my office are leaving, some of my customers and even some family and friends. They are selling their home and moving to Central Florida because they can afford to live there on their fixed income.’”
“State Sen. Steven Geller: ‘They’re moving to North Carolina, they’re moving to Georgia. They’re getting out of Dodge.’”
“Heather Carruthers: ‘Usually in Key West, there are about 400 homes on the market. There are 1,400 homes on the market right now. Every time you pick up the paper, the prices have been slashed.’”
“‘People can’t even get out now with the equity. Nobody’s buying. A gentleman gave his son a house in Key West. The guy’s a cop. He can’t afford to stay there because his windstorm is so high.’”
‘Two out of three Floridians live in areas so risky that State Farm and regulatory loss models conclude rate increases of more than 50 percent are needed to cover losses.’
Some media outfit should do a study of what insurance rates would be had home price followed the historic norms, and the building boom hadn’t occurred. A related link:
‘It doesn’t matter if your condominium is east of Goodlette-Frank Road, built like a fortress, or if your condo association has never filed a hurricane-related insurance claim. The rates have gone up anyway.’
‘Condo association directors of the Glencove, a 96-apartment building in Pelican Bay, watched their premium soar from $96,227.59 to $369,490.57. Glencove association directors are scheduled to meet Aug. 10 to vote on a per-apartment special assessment of $1,729.23 to cover the increase in the insurance premium. ‘The numbers are shocking, and no one is talking about it,’ Burke said’
Insurance is a funny business. In some ways it’s similiar to lending. You have two groups in any insurance company, the people responsible for sales, and the people responsible for limiting losses. After a lot of losses the later group get more control and premiums go up. After a while (when no money is coming in the door) the sales people seem to get control and prices become competitive.
I don’t see how the absurd home valuations would have made that much impact on insurance premiums, since they are normally based on replacement/repair costs. Just changing the price for the home from 400k to 1.3 mil, it doesn’t change the cost of repairing or replacing it. Even though construction costs have been bid up by the bubble, IMO they are not the primary driver for the premium increases. I think that after years of the sales people running the show the recent hurricanes showed the Insurance companies that they were more at risk than they realized, and that they were not charging enough to cover that risk.
They have probably overreacted and are increasing premiums more than they should. Competition will bring it back in line over time, but I doubt they will ever return to previous levels.
Just changing the price for the home from 400k to 1.3 mil, it doesn’t change the cost of repairing or replacing it. Even though construction costs have been bid up by the bubble, IMO they are not the primary driver for the premium increases.
Nope. Lawyers and Public Adjusters will inflate replacement bids to “match” the amount of inurance on a destroyed home. The lenders want their investment protected, so they require the homeowner to insure to the amount of the loan. Thus a home which can be replaced for $150-200/SF will be insured at an effective RCV of $400-600/SF. And yes, the lawyers and PA’s will present bids at these levels to the adjusters. Even cutting them in half presents a windfall to all.
(PS I’ve been there as a CAT adjuster for one of the largest Ins Cos)
“I don’t see how the absurd home valuations would have made that much impact on insurance premiums, since they are normally based on replacement/repair cost”
The other side of that is until relatively recently you had 1000sqft beach bungalows. Now you have 5000sqft mansions,and Condos’s etc. Filled to the brim with expensive toys. Your talking CBS constructiopn with jalousy windows versus, engineered composite,and pella windows…Costs ,replacements have increased…..
Beach bungalows were built small and cheaply because of the expectation that they would be destroyed on a somewhat regular basis. These days, people expect to build a McMansion, but not pay higher insurance rates than people who live in safer areas.
EXACTLY!
Well I for one was shocked when I got a call from my mortgage company shortly after I bought my house telling me that I needed more insurance. I simply looked at my assesment and got insurance in a amount equal to “improvements”(meaning the house) I figure the LAND wasn’t going to burn down. No, they wanted homeowners’ insurance on the entire purchase price.
Yes, Jim, you may not realize it, but this is incredibly widespread. Happened to the people who bought my place. Many homeowners got insurance quotes while they were buying that all of a sudden “just magically shot up” not too long after they closed. I mean dramatically shot up. What’s up with that? The timing is interesting. I think a major case could be made for a class action fraud suit against the insurance companies, who probably knew damned well that if they hit the homebuyers with the costs up front, a lot of homes probably wouldn’t have closed. Which would have not been good for the banks and builders. I’m wondering how many people who bought in Florida during the bubble would not have closed had they known what their insurance would increase to. So I don’t want anyone preaching to me about how Floridians cry rape. The way I see it, the banks, builders and insurance companies all shared a philosophy of “Hook ‘em and F–k ‘em”
I knew homeowners back when Hurrican Andrew came through South FL that made out like a bandit through their insurance company.
Their house might have been worth $200k at the time. Insurance cut them a check for $175k for the house and possessions, and then sold their house for $150k or more.
Some opted to stay and repaired their homes for much less than what the insurance company paid them out.
Ins’t that called fraud?
“As prices soften, market watchers say investors are getting burned off. The number of investor homes is difficult to quantify. About a third of Pasco homes are listed as nonprimary residences. Wells said that number has grown to 30 percent currently.”
About a third. That’s a hell of a lot of people evetually rushing to the exits.
This is a vicious cycle. The people move-in paying incredibly high prices they can’t afford on extremely risky mortgages. The banks realize this is insane. Insurance rates go up. The people that drove up the insurance rates themselves cant afford the new rates and we end up in a huge sell-off.
The thing is, none of these news articles are adressing what in my opinion is the S. Florida epicenter: Miami. There are SO MANY condos built and being built and one bank estimates 85%, let me repeat that: 85% are investor owned. Whos going to live in all these apartments. How much are people going to lose? I can see many of these condos losing 50% or more of their value.
We have about 500 rental units here in Jacksonville and we are completely dropping our property and wind insurance on all of the units due to rediculous premium increases. We came to the realization that if we were hit by a hurricane, we would never collect the insurance money anyway. If it happens, we will just rebuild and keep going.
Jacksonville’s existing inventory is going to hit 15,000 on the MLS this week or the next. If you drop in the FSBOs, the number will be over 20,000. This is increadable considering JAX is a small city with only 1 million people in the entire metropolitan area. Builders are already accepting offers of 1/3 off the list price on existing inventory and older homes are just sitting there not selling.
“Palm Beach County has 653 finished vacant homes, which equates to a one-month supply. That’s the lowest in South Florida, but it’s still rising”
I love the way these people painfully twist the fact to suit their agenda. According to the latest numbers from PB county :
http://iprecom.tempdomainname.com/trendg/images/palsld.PNG
There are about 22,000 houses for sale and about 1200 sold. That is an EIGHTEEN month supply. Who cares that only 653 are vacant?
I think they must be talking about just the homes that have been finished by the original builder and not sold yet, and not counting all the new homes bought by investors that are sitting vacant. Based on the bicycle-touring at dusk method, there are at least a few hundred vacant homes just in Abacoa development of northern Palm Beach County.
Are you self insuring? I think many older residents may only have this option. Of course, you have to own your home out right. The banks would never go for that, as they shouldn’t. They have to protect their backsides.
Yes, we are self insuring. But, self insurance is not a good thing either. We are tying a ton of money up that we now can’t use for other purposes.
The state and federal gov’t is going to bail out these homeowners with cheap insurance. You watch. I wouldn’t be surprised to see them give people a deduction for their insurance costs.
Stupid Stupid…
Goverment bailouts are code for taxes. Higher taxes and lower home prices in a softening economy at the start of an uptrend in the decadal oscillation. That’s a formula for implosion.
Robert, it’s only code for higher taxes if the gov’t balances it’s budget, for which I’ve seen no propensity to do so (federal).
Robert’s definition of taxes:
What the government spends, not what it collects.
Got it
Take proactive steps now and write your reps asking for NO bailouts for over-levereged home “owners.”
Reminds me of what CA Rep “Anna Eshoo” tried to do when the Dot-Com bubble exploded! She tried to get legislation passed to excuse would-be-millionaires (who owed taxes on their now-worthless stock options because of how AMT is calculated) from their tax burden! That made my blood boil. How could a “democrat” do that? (I told her off, nicely, when she came to speak at my synagogue, courting what she probably thinks is the “powerful Jewish vote”. We saw right through her.)
“tried to get legislation passed to excuse would-be-millionaires (who owed taxes on their now-worthless stock options because of how AMT is calculated)”
Actually that is not a dumb idea. I don’t think people ought to be taxed on money they never made. Remember that some people were under restrictions from selling but they were taxed from date of exercise. And others were convinced by management to not sell.
They weren’t margined on these options, and they really had little idea.
Think of it this way: they were employees, got stock options, market crashed, they got fired, and they lost all their investments.
Usually when you lose your investments then you lost, but you don’t pay taxes on “virtual gains”. They did. They had a huge tax burden for money they never received. (In fact in exercising options some had to put in cash).
This is entirely different from over-leveraged homeowners who go it leveraged and *knowing* they actively owe this money. They will get screwed, and rightly so.
Virtually none of the dot com employees had any clue about this bizzare AMT problem. It seemed inconceviable and unfair (which it is). Now, of course because of the problems many more people know.
“Actually that is not a dumb idea. I don’t think people ought to be taxed on money they never made. Remember that some people were under restrictions from selling but they were taxed from date of exercise. And others were convinced by management to not sell.
They weren’t margined on these options, and they really had little idea.”
I have to VEHEMENTLY disagree with you here! I also, had “stock options” at that time, and I decided not to exercise and hold at that time, but instead always did “same day sales.”
Why not? Because my accountant told me all about the AMT and how I could be subject to this even if the stock goes down to zero. Plus I was smart enough to know this was funny-money. (It was tracking stock for a Big Media Company’s failed dotcom venture. I was working for the Big Media Company, not the dotcom, but I got some stock options.)
So I declined to take the risk because I knew the consequences. This is a COMPLICATED transaction, the only reason you’d exercise and hold is to get the lower capital gains rate. If someone’s that SAVVY they should know better.
So these people took a gamble to beat their taxes, lost, and now want me, an HONEST HARDWORKING TAXPAYER to pay for them.
I can’t imagine why I should bail someone trying to get rich quick from dirty-dotcom-dollars out! Can you explain to me why I should be bailing those people out?
Virtually none of the dot com employees had any clue about this bizzare AMT problem. It seemed inconceviable and unfair (which it is). Now, of course because of the problems many more people know.
Nonsense! The tax laws are stupid, we both agree, but they exist. And if you get yourself involved in a transaction that could leave you with a six-figure tax bill that’s your own problem. I’m not shedding any tears for these “dot com geniouses” and I’d be dammed if they get tax breaks for being stupid.
There’s no difference between that and living off welfare.
Amen.
Amen redoubled — from another who has exercised stock options and knows exactly what companies have to tell employees who do that.
Why is it that the rest of the US has to subsidize Floridians? I just love it when Floridians make the comment regarding hurricaines: “Just the price we pay for living in paradise”. Two problems with this statment: 1) Florida is hardly paradise. Overrated swampland, IMHO. 2) Not only do the Florida residents pay the price. We all contribute.
I don’t know where people get this idea that Floridians expect the rest of the US to susidize us. Maybe from our politicians, who seem to think a nationwide insurance pool is the answer, but the citizens of the state don’t have that point of view. We just think our politicians ought to do their jobs from the get-go, what a concept. We recognize it is our problem, and we are willing to deal with it among ourselves.
But since you brought it up, why, as a Floridian, should I subsidize farmers in other parts of the country who are stupid enough to grow crops nobody wants to buy? Why should we subsidize the educational and medical needs of millions of illegal immigrants so farmers can grow those crops and builders can build crappy, toxic homes with cheap labor?
Yeah, some of Florida is swampland, so what? Right now, a large swath of this country is fast becoming a parched dustbowl. Overrated parched desert, regularly swept by tornados. At least we got water. That is, until Nestle Waters (French company doing business in Pasco County) can figure out how to tap all the springs here and sell the water in fancy bottles for outrageous prices all over the world.
Like any other state, Florida has its good and bad points. Yeah, it gets hot and humid during the summer, but right now, we are better off weather wise than parts of California and the midwest. Before all this rabid development, Florida had some great beaches, excellent fishing, hunting and boating. There’s nothing like tubing down a Florida river or taking a dip in one of the many wonderful springs during the heat of mid-summer. There was a lot of natural beauty in many areas and outside of the major cities, some great uncrowded areas where a person could kick back without hearing his neighbor sneeze. So what if wages were low. So was the cost of living and Florida was a great place to escape the corporate 9-5 drudge lifestyle and stick it to the man. So what if you got fired from a crappy low wage job? Or quit? You could always find another one and still pay the bills and even save a little, because it wasn’t what you made, it was what you could keep.
But that’s been ruined by all the out of state sharks with their phoney baloney work ethic rah-rah, their lousy cookie-crapper development with moldy sheetrock, imported gang-bangers, agribusiness mining for fertilizer phosphates and creating a moonscape while they do it (so farmers in other parts of the country can be subsidized to grow crops they can’t sell) you name it. Dickbags from other parts of the country eager to rape Florida and take their profits back home. WE don’t want to subside them.
Do me a favor, though. Please, just keep telling everyone how lousy Florida is. Shout it to the highest height, PLEASE. Tell ‘em this place is bad for business, bad for retirees, bad for families, bad for investors. If there’s one thing good that might come out of this insurance mess, maybe all the jerks from other parts of the country will stop coming here and buying the cookie-crapper homes.
Wow.
What a fantastic summary about living in Florida.
I have been here 17 years and watched things deteriorate jsut as you described.
The tradeoffs in low-paying jobs for a more laid-back lifestyle has always been worth it to many down here until recently.
Now, the people who have lived here all along and BELONG HERE because THEY LIVE HERE are leaving in big numbers.
The “money people” came in here and ruined it for everyone. Greed is bringing the whole way of life down.
It sucks.
yes los angeles sucks too, dont come here.
Again, well said! I travel there on business periodically and lived in SoCal for 4 years when I was in Uncle Sam’s Yacht Club. EVERYONE wants to live in CA. Earthquakes, mudslides, brushfires, overcrowding, urban sprawl, horrible traffic, toxic air, high cost of living, rampant crime and the most socialist state-government in the nation. So many want to move to CA that I’m amazed there are still 1,000/day (or 1,500/day or 2,500/day or whatever the lastest BS line is) who still want to move here to FL…
DC sucks the most..
Florida is where the house I bid on is. I still like Florida a lot and would buy there if it made any sense at all.
I think you and I have a lot in common. I remember “old” Florida and know exactly what you’re talking about. I still have a romanticized view of the place which is why I keep looking for things to buy there, especially in the northern part of the state.
Agree. “Old” Florida is fantastic. I’ve put up with the cruel jokes from out of staters about “There are still parts of Florida where teeth are considered a luxury”. Well, some of those toothless folks are the ones all the weekend warriors in their SUVs and LL Bean canvas vests want around when they’re looking for the fish or game. And the toothless guys know how to live with Florida when the lights go out. I’m just majorly geezed that this downturn isn’t happening fast enough. I just want it to go away so we can maybe salvage a little of what we’ve got left.
Well said!
Palmetto, That is the cry of almost everywhere now. Ask anyone in California, Florida, Arizona etc….
“As a kid I went on vacation in Sarasota. We rented a beach house,and only saw 4 people on the beach..” Now you can’t even see the water.Are population has increased 100 million since 1965. How many immigrants, illegal ,and otherwise in the past 10 years? Quality is going down ,and we seemed determined to pave over any bastion of rest ,and sanity…read: open space.
Well said Palmetto! I too find Florida paradise! I’m looking forward to all the northern whiners moving to GA, SC,NC…. I think just as people told their friends up north what a wonderful place Fl is to live 5 years ago causing hordes moving down, it will have the same effect as the whiners tell their friends what a horrible place it is!!!!!!!! Florida growth will remain stagnant for years to come! Alleluiah! Realtors, investors, developers….Don’t let the door hit you on the way out!!!!!!!!!!!!!
Or, as I like to say “Don’t let the door hit ya where the Good Lord split ya”.
So what if wages were low. So was the cost of living and Florida was a great place to escape the corporate 9-5 drudge lifestyle and stick it to the man. So what if you got fired from a crappy low wage job? Or quit? You could always find another one and still pay the bills and even save a little, because it wasn’t what you made, it was what you could keep.
This is how I’ve always viewed Florida (well most of it, anyway). It’s never been appealing to me, personally, but it’s a shame that it’s no longer the “escape from big city, big corporate, etc. b.s.” that it used to be.
My “Florida” is the mid-west (I love winter, what can I say). I keep thinking I might move to the middle of Iowa or something, pay cash for a house, and waitress for a living. If I didn’t have my son, this would be more a reality than it actually is. But I never say never…
Good comment, Palmetto. That describes how I feel to a tee. A certain way of life has been vanquished (forever?).
But that’s been ruined by all the out of state sharks
Who elected Jeb Bush?
Who elected the corrupt local governments who allowed all the slipshod development?
Who sold the land for development for big $$$?
Right. It’s always the same old complaint. Vermont, NH, Oregon, Florida, etc. It’s the outsiders’ fault.
It’s the locals trying to make a quick buck, and not giving a damn about good government or responsible development, who have ruined Florida. Just like everywhere else.
Just as Floridians cover earthquakes, fires in CA, hurricanes in other coastal communities. Basically insurance should not cover anyone who lives in CA and all coastal communities that can be affected by Tsunami, hurricane… Heck, NYC shouldn’t be covered either. You know they are predicting the big one to hit there.
People ARE talking about it, and the local media runs stories about it all the time, but since we have an election coming up, the politicos are using it as a platform to run on, rather than do anything about it.
I want to say, “Don’t get me started, Ben”. But since I’m all fired up, here goes.
As a Floridian, I can tell you the insurance problem was created by politicians at both the state and local levels. They create the monster, we have to deal with it. This problem could have been solved long ago had Florida required every insurance company that wanted to sell auto or life insurance or even crop insurance in the state to also sell homeowners. One of the gubernatorial candidates is touting this as a solution, like it’s a new idea. Another way the problem has been created by the politicos promoting and encouraging the insane, unfettered growth and building. You’d think, after this state got socked by four, count ‘em, FOUR, hurricanes in a row, and after watching the horror of Katrina, there would have been a moratorium on waterfront development. But NO! Various county commissions here in West Central Florida were in a hot, heaving sweat to re-zone and permit as much insane development as possible, in flood zones, over sinkholes, you name it, if it was a bad idea, they did it. Over the loud protests of concerned citizens. According to my insurance agent, Pasco County has something like 70-90% of the sinkhole claims in the entire state. The solution by the politicians? Let’s develop the county EVEN MORE, and if a developer wants to develop over a sinkhole area, let’s see how hard we can work to push his permits through. For Florida, it’s like watching lemmings determined to go over the brink.
But ultimately, this speaks to the personal responsiblity of individuals, who buy without doing due diligence. The hard lesson from all of this is to learn that politicians, while there are good ones here and there, are mostly a very low, vicious class of people these days and they don’t work for the citizens. They work for business interests. Period. On our dime. There are many decent people who are staff members of local governments and they are the ones who do the heavy lifting. They make the recommendations, which get shot down when some big swinging dick attorney representing a developer threatens to sue. I’ve been to county commission meetings and I’ve seen it.
Bottom line is, with all the news on the problems that Pasco County is having with sinkholes, you’d have to be an idiot to buy from ANY developer there and then complain about insurance. Problem is, many people are naive enough to think that if the county approved it and the developer built it, it must be OK.
“I built my house with bricks.”
Try building tougher houses. Typhoons (hurricanes) hit Japan every year. Their buildings do not fall down.
Here’s what you need. A solid concrete dome!
http://www.domeofahome.com/
I’d love to build one of these, but I don’t quite have the “balls” to do it!
Palmetto,
Very interesting post. I don’t agree that requiring all Insurance companies to sell homeowners insurance is necessarily a viable solution, since that will just have the effect of subsidizing the cost of homeowner’s insurance with higher premiums for other insurance products.
I agree with you completly that building in high risk areas is the primary problem. It’s guaranteed that if you build where you will take losses you can expect higher insurance premiums. The best solution would be to zone the high risk areas and make people buying insurance in those areas to pay the full cost of the risk, and give a break to people living in safer areas. That would provide a necessary disincentive to buyers, developers, etc. As long as the owner of the home on the sandbar can force all the other homeowners to cover his risky home, he has no reason not to live there. The developer has no reason not to build it for him. Etc.
“I don’t agree that requiring all Insurance companies to sell homeowners insurance is necessarily a viable solution, since that will just have the effect of subsidizing the cost of homeowner’s insurance with higher premiums for other insurance products.”
Sorry, I disagree. The theory behind requiring any company selling any insurance product in the sate of Florida to also sell homeowners is that it provides a greater pool of insurers and spreads the risk, which is what insurance is supposed to be all about, anyway. Paying a little more in auto insurance or life insurance wouldn’t bother me, if it meant paying a lot less on homeowners.
Besides, taxpayers in the state of Florida subsidize businesses all the time, especially in health care for the low wage workers who have no health insurance, for example. As far as I am concerned, people have drunk the corporate shill Kool Aid about “subsidizing”. There’s no greater subsidizer than the tax payer, who subsidizes business all the time in mostly hidden ways. Except we don’t have the choice who and what we want to subsidize, like the insurance companies do. Try not paying taxes on your home.
Tell you what, I’ll agree not to force the poor corporations into subsidizing me if I don’t have to subsidize them, like I am now subsidizing Halliburton and Exxon Mobil, for example. See, I happen to think those bastards oughta pay for the war in Iraq, since they and others are profiting enormously. We, however, are paying, not just with taxes and debt burdens, but also with the blood of our young men and women.
I know when we moved to Florida and our insurance company State farm, whom we had been paying into for years, wouldn’t write a homeowners policy but were begging us to keep our automobiles with them, we said no thanks! We found a company that covered us in all aspects. We have to pay a percentage if it’s a named storm. In 15 years, my neighborhood hasn’t had anything more than some shingle damage, maybe a tree on a house, which could happen in any state……… Yes, the insurance companies should spread the wealth.
“This problem could have been solved long ago had Florida required every insurance company that wanted to sell auto or life insurance or even crop insurance in the state to also sell homeowners.”
Dude. Free markets don’t work if they are not free.
Floride gets hit by hurricanes. That’s a fact. It should be more expensive to insure homes in those zones. You can legislate away the math. Try to force companies to provide home insurance along with other types and they will have to shift the costs to those products.
Either way you have to pay for the risk. Shouldn’t the people taking the risks foot the bill?
“Can’t” legislate in the above.
“Dude. Free markets don’t work if they are not free.”
DUH! Since when do we have free markets anyway? Call me cynical, but I often feel there’s very little in the way of free markets.
But, going along those lines, my theory is that the population of Florida is a market. And what’s wrong with politicians (who are supposed to be the people’s lobby, though they are not) saying, hey, bud, wanna do business in Florida? Well, here’s the deal. Ya gotta offer insurance or ya don’t get to do business at all. It might be a harsh inducement, but it’s still an inducement. If the pols had been working for their constituents, another inducement they could have offered to the developers was to make them pay into a state fund for insurance. That would have controlled growth, that’s for sure. Hey, what a marketing tool for the developers!! Buy our cookie crapper THIS WEEKEND and we pay the insurance for as long as you own the home.
And how exactly genius, is spreading the real cost of insuring a house in a hurricane zone to totally unrelated activities going to make it any cheaper?
It will just make the insurance for those other activities more expensive and add another layer of distortions to the insurance market.
Again. Shouldn’t the people who take the risks pay the bill for protecting against those risks?
We recognize it is our problem, and we are willing to deal with it among ourselves.
In an otherwise excellent piece this stands out as not entirely ringing true. I’m thinking in particular about hurricane insurance. Insurers were making the case for 79% increases to cover their loses in the 04-05 season and to brace people and soften the blow for next years’ requests to fully account for the 05-06 season (rates lag claims by a year). Floridians cried rape and the regulators only granted 50% causing a rash of market withdrawls exacerbating the problem. That doesn’t sound like personal responibility to me.
“In an otherwise excellent piece this stands out as not entirely ringing true.”
In an otherwise interesting reply this stands out as incredibly condescending.
Losses. What losses? Insurance companies don’t lose money, they just don’t make as much profit when the “market” (in this case, the climate & weather) turn against them. Unless they have been imprudent and improvident and not wisely investing the profits they made during the MANY YEARS of good times to shore up their losses in the bad times. Which is what banks and insurance companies preach to the rest of us, and what we preach to FBs.
That said, ultimately no business can be forced to provide any goods or services if they don’t want to, and shouldn’t be. However, here in Florida I am forced to subsidize the state owned Citizens Insurance, not just for my fellow citizens, which I don’t mind, but for the developers, THOSE were the guys who cried rape when Citizens started to withdraw insurance from them, because they couldn’t get it anywhere else. So Citizens, courtesy of our low, greedy and vicious politicians, decided to extend the time period of coverage for the developers, I guess so they could all finish their cookie crapper homes, take their profits and leave the state, sticking the Floridians to figure out what to do with the overpriced slums they created.
Losses. What losses? Insurance companies don’t lose money, they just don’t make as much profit when the “market” (in this case, the climate & weather) turn against them.
What losses?!? Insurance companies lose money all the time. It is part of their business model. An insurer that doesn’t see loses is being poorly run and ultimately needs to charge more. I’m sorry your feel my pointing out that you don’t understand the insurance business was condescending as my intentions were educational.
The insurers took losses in 04-05 and remodeled their risk assesment as they do every year for both good and bad weather. This risk remodelling was thwarted by consumers running to their legislators demanding relief. That relief didn’t change the risk assesment so insurers declined coverage. Now you want to mandate coverage provison as a price of doing other business. That sounds a whole lot more like pawning responsibility than taking responsibility.
FWIW,
I have a client that is a CFO of an insurance company here in ATL.
They had huge losses in FL to paid out over the past few years. We spoke about his stock options and the risk to those options. He wasn’t worried.
He commented, ultimately how it would be good for business: read much higher premiums on the entire population. The year after his compensation was through the roof, as were earnings for his company.
Thanks Jackie, that’s the point I was trying to make to Mr. Cote. I understand the insurance business, all right, just as you described it. If insurance companies “lost money all the time”, they wouldn’t be in business and some do go out of business if they are under-capitalized. In any one year, they may pay out more than they take in and to that degree, there is a “loss”. As Mr. Cote said, they just adjust their models to compensate, so not only do they MAKE UP the loss, they make more profit. That’s what I mean by “insurance companies don’t lose money”. Not in the long run. I’m just saying they are making more than they are losing. Otherwise the insurance business wouldn’t exist.
Robert is correct. To the extent that we still have free markets of a sort, if one Atlanta insurance company is making a killing on current insurances rates, after provision for losses, other companies will be attracted to the market and very quickly. Price cutting always ensues when that happens. Insurance is not oil — there is a limitless supply of insurance available at the “market” price; the fact that it cannot be ramped up within a particular 12-month period does not change that fact of the market.
Free markets are impeded and rendered less effective whenever governments interfere with them, no matter how much a particular politician reflects an individual’s views. IMO, government should butt out entirely from the insurance debate, whether for Florida, California and the rest of the U.S., and let the market handle it. Short-term hiccups are possible, but long-term savings are greatest.
….I’m sure you know about all the Millionaires that were buying Citizens Ins. for their beach homes? They were able to get it that was thousands cheaper than their regular policy. There was an outcry as to why someone inland was paying more that these people were on the beach….. Work the system for your benefit until it implodes I guess.
—
As to building codes. After katrina the only thing standing on the beach was the lighthouse..Why don’t they build homes like lighthouses? Ha..
My house (moved in new construction in November 2004, northern Palm Beach County) survived Wilma with total damages of one palm tree blown over and two roof tiles cracked by my own feet putting the hurricane shutters up
It was under construction during Jeanne AND Frances, and despite having uncovered windows (since it wasn’t finished) and a bunch of construction crap laying around, it made it through just fine with bascially no damage. Even our OLD house (built in 1985, so to pre-Andrew useless building codes) survived Jeanne and Frances just fine (going through the southern eyewall, incidentally) with a few shingles ripped off, the vent cap on the roof failing such that a bit of water got in the attic, etc.
And you know what? Right now, my insurance costs are in the process of almost doubling. It’s total B.S. Yes, we have gotten a lot of hurricanes in the past couple of years. But the fact is, each individual storm impacts a relatively small area. Given the insurers are doing business all over the state (heck, all over the country for that matter, if you’re talking about State Farm, Allstate, etc.), it’s ridiculous that they’re whining and bitching so much about these storms. Let me also point out they had more than 25% years with basically NO storms in FL. They are way, way overreacting and asking for too much money given the overall, long-term hurricane risk in my view.
they were underwriting for small losses so their rate levels were out of whack when the storms did hit….
It will obviously take 2-3 times more to insure bubble prices..once prices go back to its long term trend, insurance will adjust as well.
With regard to that, what are the implication for home prices when commodities’ prices burst?..as concrete (chinese concrete production itself is so much as to cause excessive supply as overheating there subsides)/lumber/steel prices take a hit, the oft-quoted material prices of ~$80-100/sq ft by the contractor would go down dramatically..(for ex. not so long ago, concrete was (2002)$45/cu yd - [now ~$120])..Land prices -we all know that urban land usage in US is one of the lowest amongst developed countries (i believe 2% or so as per shiller)- will, if not already, adjust as well.
commodities, in my opinion, may burst sooner than the housing rout we all anticipate…
Some commodities. They are a tempting bubble for shorting but people have gone broke trying to do that. I’d like to do it but will wait for trendline breaks.
Clearly May was the time to do that. Summer is seasonally weak for gold so I think that it’s not a good short at this point.
Natural gas is roaring back to life on the demand for electricity. But $WTIC and $GASO looked pretty weak on Friday’s chart. I’m sitting out the summer in cash. It’s been pretty relaxing.
It’s always clear in the rear view mirror. I am long natgas.
me too.
Lumber is already in a pretty strong downtrend.
Weekly Lumber Chart
Regarding the topic title: isn’t supply > demand now?
Yes. They will only come back into balance after the market price falls, and everyone realizes that it has fallen. But so long as buyers are on strike and inventories are growing, that will not be the case.
Ahhhh, they did ring the bell this weekend in the Sunday Miami Herald Real Estate section. Keyes Realty is now rolling out acreage in the Redlands for only ten times what it was selling for ten years ago. I lived in the Redlands so my jaw dropped at the prices now being asked. We are talking about living in the middle of nowhere with no amenities nearby. Avocado groves for $200,000/acre are ludicrous if you understand the master urban plan. The zoning is still holding at five acre estates and it’s not until the next r.e. cycle that you are likely to see this zoning substantially changed. (We are NOT talking Homestead here. We are talking about land West of Krome!!!)
As an aside—-if you live in Miami the new wind insurance rates that my friends are receiving are numbing.
The rich in the residential sector will jettison their coverages and the spike in rates in the commercial sector will ultimately be passed on to the consumer. No one to date has worked out the ripple effect of this phenomenon.
Welcome to Manhattan South, folks.
Manhattan South today. Ghost Town tomorrow?
“‘People can’t even get out now with the equity. Nobody’s buying.”
It sounds as though market values have caught up with home equity gains…
I love how people reason the answer to the HB is to escape to another city where they think they’ll be safe.
Check out this article about a mortgage broker in an affluent Atlanta suburb where most of the high-paying tech jobs are:
http://globaleconomicanalysis.blogspot.com/2006/07/lights-out-in-georgia.html
I don’t think the answer is to move to another city where you’ll be buying at the top of their bubble. The HB is now NATIONWIDE. The safest thing would IMHO is to rent and wait it out.
Oh my, that rings a bell! A friend of mine moving out of Atlanta is experiencing that market first hand, and he cannot sell his house. Let’s just say, he cannot sell his house for what he wants it to be worth. So after a very failed attempt at selling, with no offers even close to what he wants, he’s decided to rent it out. Oh no!
The problem is, he insists on getting enough rent to cover his mortgage, taxes, and insurance — and that puts him way above the going rate for rent in that market. So instead of taking a $500 loss on the place every month, he’s taking an over-$2,000 loss every single month. That’s assuming nothing breaks in the house. And this has been going on all year, with no renter wanting to sign up to pay this guy’s debts for him, apparently.
Now he’s throwing in the towel. In a fit of sour grapes, perhaps, he’s decided that if nobody wants to give him what he wants for the house (buy or rent), then he’ll just show them: He’ll just keep it as a second home! Gosh a vacation home in the Atlanta suburbs. I’d heard Altanta is a decent place ot live, but… for vacation?
At least he makes good money and has a fair amount of savings, and this could probably go on for years without bankrupting him, so he won’t be the typical FB, given his cash backing, but… this sounds like a (financially) ridiculous thing to do with a house. Does he realise what this will cost him in foregone savings? “Oh, but the market will bounce back, and we’ll sell it then…”
what a waste of resources.
Another “entitlement” driven financial debacle in the making. Sounds like he wants to ride it in so at least it is free entertainment for you over the next few years.
Great exchange between (Realtor) Sonnypage and Mish. While I give Sonnypage a lot of credit for owning up to his grossly incorrect forecast about the housing market, he apparently is not a real Southerner. Had he been, he’d have been gallant enough to concede that Mish was right all along, something he apparently did not do.
“You’re screwed” becomes “Y’all’r screwed” as this unwinds. Ben’s blog sort of reminds me of the days when a grifter could learn the winner of a dog or horse race in time to place a bet with a bookie — I almost (but definitely not quite) feel guilty about being so far ahead of the game simply by following these posts for the past 18 months.
Miami is fast approaching 40,000 units for sale. Broward and Palm beach county have in excess of 18 months supply. The number of foreclosures is growing at a rapid pace.
Now that the Bubble “genie” is out of the bottle, it will be nearly impossible to stop the momentum in depreciating prices that is building. Inventory has changed from ’strong’ hands to ‘weak’ hands - bagholders- and the majority of those that bought in the last two years have;
1. NO equity
2. used exotic financing to purchase
At some point ( I believe sooner than later) these Fuked Borrowers will become Fed-up borrowers and will walk away from closings and their houses. We see it happening already. It is going to increase greatly over the next 2 years as the resets hit. This is the tip of the iceberg.
Pasco county - one of my favorite topics. 5 years ago Pasco was farm country; today it is sprouting with McMansions and crappy tract homes yet continues to have no major industry and serves as a bedroom county for Hillsborough and Pinellas counties. I fail to see the allure of living in Pasco for the average suburbanite. It offers the same stuff available everywhere along any interestate exit (Wesley Chapel), a crack town (Holiday), and a sleepy country town with McMansions beside dairy farms (Zephyrhills). Never mind it sits behind Polk county for the largest concentration of mobile homes in the state and has a severe sinkhole problem. I don’t see any corporations building the office parks that are envisioned for at least 5-10 years. In the Tampa area there is enough vacant high-tech office space (Tampa Palms, pinellas) to handle the expected growth for at least 5 years.
I do feel sorry for the regular joes who live on hobby farms in the area who have been priced out of thier lifestyles or surrounded by ugly tract home developments. We even lost our little airport (Tampa Bay Exec) due to unrestrained development.
MOMAN! How ya doin’? How’s your friend Bud? (LOL) Man, you are sooooo right about Pasco, it is one of my favorite topics, also. For a long time, I thought about moving to Dade City or San Antonio. I used to really like it up there, a couple of great little towns. I just wanted to get a little POS concrete block box with a little bit of land and really kick back. Used to be, you could still get to Tampa in a reasonable amount of time. But then, traffic started backing up big time at rush hour on SR 52 to get on 1-75. And lately, there have been a rash of what seems to be gang-bang shootings. Now Dade City and San Ann have been boxed in by those cookie crapper slums.
I’ve ridden in a bicycle event in east Pasco during the last two years. Even with my limited two-year vantage point, it is obvious that the landscape is changing, and not for the better. I am utterly mystified at the “value” these new places have. To use a figure of speech (not my own, unfortunately), I think many of the buyers are lemmings fighting to get to the cliff.
I cannot think of another state where so much beauty competes with so much ugliness. In my opinion, the last few years have significantly over-weighted the ugly side of the scale, all so people can have a so-called investment.
“I cannot think of another state where so much beauty competes with so much ugliness.”
Well said, snaker charmer. And I, too, don’t understand the so-called value these new places have. It frightens me to think of what we must be turning out educationally for people to accept this sort of thing.
One more note on Pasco. Did you read in the paper this week about how Pasco county is having a record number of murders and how surprised and perplexed everyone is about this?
She bought a new Hovnanian in palm Beach now it’s molded over…
http://tinyurl.com/qfbh8
This is great. Hell-O? This is Florida. It’s humid here. Mold is a FACT OF LIFE! If you have environmental illness, this is NOT the place for you. They want the builder to buy it back because of the bubble burst, I’ll betcha. Can’t sell their home and this is their way out. Painfully obvious. They are playing the victim card. Nice try, but it won’t work.
That’s right, folks, stay out of Florida. It’s bad for your health. There is a fungus amongus. We have a SEVERE mold problem here. Go to Nevada or SoCal or New Mexico or Az. Please.
Mold, alligators, hurricanes, flying cockroaches, humidity, hurricanes…..so much to hate about Florida.
Red tide, gridlock, gang-bangers, exploding meth trailers, mosqitoes, West Nile Virus, early bird specials, your turn lizzie.
i’ll bite
1/2 blind 85 yr olds still driving 4000 lb. missles, strip malls, state sport: shuufleboard, sh!tty schools, most lucrative business: undertaker……
You forgot crappy education system, poor tap water quality, inflated energy costs (add that to elevated ins. and tax cost Mr. FB) and corrupt city planners.
Hanging chads! Oh and did I mention hurricanes.
This looks fishy to me. I’ve live in Florida for more than 60 years. In the old days, we had no air conditioning and relied on fans and jalousie windows. We didn’t have mold problems, that I remember. I suspect that this woman might have been cheaping it on her air-conditioning. It is very unlikely that Hovnanian installed a much-too-large unit that would not have cycled on often enough to keep the humidity down; rather, I suspect that she kept the thermostat too high and THAT caused the a/c to cycle on too infrequently, thus the mold. Just as in every divorce, there are two sides to this story and we’ve heard only one.
Look, I apologize if I’ve offended anyone with some of my posts on this blog today. My bark is worse than my bite. I really enjoy all the bloggers here. I learn something from each and every one of you and it’s made working at home much more fun for me. You folks are a cross section of the bedrock that makes this country great. You might say, the blogs are the eqiuvalent of office water coolers for those of us who telecommute. Differing opinions provide spirited debate and sometimes new ideas. I happen to have a great affection for this weird but lovable state of Florida and also for this country and I’ve been feeling like I’m watching two well loved family members or friends sicken and die, the way things have been going, the combination of this housing bubble and national/world events. So sometimes I feel a little frustrated and that comes out in my posts. Bygones.
The only offensive part was the “cookie crapper houses”. You obviously don’t appreciate quality construction. HA HA HA.
Palmetto, I too grew up in Fla. and am beyond words to what has been allowed to happen. What was the once a beauty has been destoyed due to total disregard for the environment….I supposed would counter that a beach front condo is a natural eviro…Oh well. Anyway short of a worldwide pandemic ,wish, or scream there is only going to be more, more until the last acre has been paved. We as a race seem hellbent on overpopulation until destruction…is there any model that isn’t based on ever continuing growth?
Eastof, I’ve read your posts and they are always very thoughtful about Florida, with a great perspective. I had always hoped, because people seemed to have such a low opinion of the state, that we might get away only mildly scathed. Oh, well, it is probably karma from the 2000 election.
Same crap in s. jersey. We had a lot of nice farmland in Gloucester County. Now it’s shitty tract housing. Do google earth and check out how much space those 2 acre estates eat up. All so some a-hole can jump in their SUV and do 80 to work 35 miles away.
I am just amazed how much commentary I got from you from a simple 4-line post. Way to defend your state!
Palmetto,
You spoke what’s on your heart. Most everyone I know that has lived in Florida for 5 or more years feels the same way. It’s hard not to be angry at what has happened. Everytime I see a new for sale/rent sign, signs saying we buy houses, realtors and builders billboards(the latest David Weekly on 275 saying “home in your range”, BS), the commercials,the hordes of empty homes….. my blood boils even more. I would never have imagined that I would be so angry! I think folks like you and I know this is just the tip of the iceberg.
By the way, something that you mentioned that I haven’t seen much on this blog is about the corrupt city/county officials that are backed by the developers. This is not happening just in Florida. A friend of mine in TN said that they had an election and the people of their town wanted to slow growth(not stop) as the schools,fire, police… couldn’t keep up with the out of control building, the developers gave their guy tons of money for advertising and sent flyers out to everyone in the real estate/construction business(including the illegals)saying that they shouldn’t come to work on election day unless they have an “I Voted sticker”. They said that the controlled growth people wanted to put them out of business and affect their livelihood. According to my friend there were enough outstanding permits to build homes for the next five years. Of course the developers puppet won. I hope they all go bankrupt!
“I’m moving to an area that offers some kind of sanity in insurance.”
Yuck. Politicians feed on this crap like whales on plankton. Insurance is numbers; it is about risks, probabilities and profit. Nothing more nor less. It is not a plot against homeowners, just a mathematical forecast of the higher monetary losses anticipated because of greater hurricane activity coupled with higher replacement costs. Maybe we need an “Insurance for Dummies” pamphlet. We have veered so much into statism that people expect other taxpayers to accept the risk that properly is theirs (their pool) alone. Phooey.
There are 2 avenues to go in FL as far as housing, either 1. Spend a lot of dough and buy a fortress hurricane proof home or 2. Get a cheap florida style stick home, that will easily blow away and will easily be rebuilt. In either case your house should be paid for and just skip the insurance. When I was in rural Panama the country people had these grass/straw houses that would just blow away in a strong wind and then were easily rebuilt afterward, seemed very sensible.
And a note on the insurance problem in Florida. Because of the housing building boom here and the increased tax assessments on real estate the local and county governments have had windfalls in revenue. So much extra cash that they had to have special meetings to figure out how to spend the money. They came up with great ideas such as paying for free lunches for elected government officeholders. But not once have I heard of them suggest, EVEN in the wake of all the hurricanes, “Hey lets take all this extra money and put it in a fund to help with rebuilding after a hurricane”.
Thursday, July 20, 2006
Ghost Housing Market
Following is an update from Mike Morgan at Morgan Florida.
This entire post is from Morgan so I will skip my normal procedure of indenting.
It is about the “Ghost Market” in Florida.
Mike Morgan:
We recently had two more of Wall Street’s finest out on a tour of Florida real estate markets. After the first day, these guys needed diapers. They’ve been listening to the garbage from home building company management teams and what dribble they hear on the conference calls. I showed them reality, and it hit them like a ton of bricks. Here’s a review of reality.
Inventory — Our current levels are all time highs. We’ve never seen anything like this. If you want to believe the NAR numbers, so be it. In the previously hot markets, inventory levels are well beyond a year, and in some markets 2-4 years. You have hundreds of thousands of homes in the hands of flippers, not to mention all of the unsold inventory the builders are sitting on, and you still have the normal market of people selling for reasons like death, new job, etc..
Ghost Market — Why so much inventory? The Ghost Market of so called “investors.” These people were not investors. Maybe speculators, but even that is too kind. They were uninformed gamblers. For the last two years, you had better odds at the Big Six Wheel in Vegas. And the builders knew it. The builders saw buyers flipping contracts before closing a few years back. There response was to include a contract provision that you could not assign the contract, and you must close with the builder. They told the Street they were doing this to control investors. Well, that’s pure nonsense. If they wanted to keep investors out, they could have demanded sworn affidavits. They could have put deed restrictions in regarding sale and rental of the home. But there logic was not to eliminate investors from the market, but rather to capitalize on them. So with assignments prohibited, the new wave of lemmings had to buy from the builders. And away we go! So now we have a market flooded with people that had no intention of living in the home. When, in the history of the world, have you seen millions of people buying multiple homes like a box of donuts? Like donuts, the value of these homes is dropping as they sit on the market.
Quality - Builders have been selling the vast majority of their homes to flippers. Flippers don’t care about quality. Rarely does a flipper order a competent home inspection. Rarely does a flipper even do a walk through. They are only concerned with flipping the contract as soon as they close. The builders did not let this opportunity go unnoticed. They built lower and lower quality homes, often ignoring building codes. How? In many markets the pace of construction has outpaced the ability of the local authorities to inspect homes, so these markets allow the builder to hire their very own private inspectors. Now if you hired an inspector that flagged your homes, how long do you think you would keep that inspector? So the builders find inspectors that are willing to look the other way. Many of the homes on the market today do not meet building codes. We are seeing an escalation of defective roofs, defective trusses, defective stucco and the list goes on. We actually set up a website to help home buyers with information. I’d like to report on all of the home builders, but for now our site is focused on just one builder http://www.Lennar-Homes.info. We’ll be adding new sites over the next few months.
Location - Once again, builders realized they could sell anything as long as they pegged it as “pre-construction.” Building next to dumps, rail lines and depressed areas became the norm. Flippers never bothered to visit the sites. Let’s look at Miami. Out of area flippers just hear two things. “Miami” and “pre-construction.” Our trips through Miami reveal that many of the construction zones are in depressed areas full of crack houses, empty warehouses and worse. The flippers didn’t care, and neither did the builders. But the “real” buyers that might live in these condos and homes care. And they are not going to buy these projects.
Cancellations - If you think the cancellation rate is less than 50%, I’ve got a bridge for sale. Flippers are dumb, but they are not going to wipe themselves out. If they bought a property for $500,000 and it is now selling for $400,000, why would they close? They will simply walk away from their contract, leaving the builder with more unsold inventory. Here’s one example to drive this point home. An investor client of ours was recently released from his contract price of $490,000. The builder just resold it for $315,000. That’s a “real life” example. That’s a 36% haircut for the builder. Margins? There are none at these prices. P/E ratio low? How about no P/E ratios? One final note: The flippers have about 3% in closing costs with the builder. Then they have about 10% with the new buyer. So they need a 13% increase in price to break even. What would you do if prices have already fallen by 20%? Lose another 7% or walk away from the contract?
Affordability - Prices skyrocketed artificially because flippers did not care about price. They only cared about one thing . . . We’re they getting pre-construction pricing? Now we have a flood of inventory on the market that buyers cannot afford. First time buyers generally need homes under $300,000. Even in previously hot markets like Port St. Lucie, we saw average home prices rise above $300,000 for pre-construction homes. And the high end market is not immune to this problem either. Buyers that purchase million dollar plus homes are far more astute then the first time buyer. The high end buyers read the Wall Street Journal and follow the numbers. They see the massive build up of inventory, and they all tell me the same thing. “We’re looking, but we’re going to wait till prices come down.” And with that kind of logic, prices will continue to drop.
Interest Rates - Compounding the affordability problem are interest rates. A little over a year ago a buyer could secure a $300,000 mortgage for $1,250 a month (less if they used an ARM). Now the same buyer is looking at a $1,750 mortgage or $6,000 a year more in mortgage payments.
“Because of the housing building boom here and the increased tax assessments on real estate the local and county governments have had windfalls in revenue. So much extra cash that they had to have special meetings to figure out how to spend the money. They came up with great ideas such as paying for free lunches for elected government officeholders. But not once have I heard of them suggest, EVEN in the wake of all the hurricanes, ‘Hey lets take all this extra money and put it in a fund to help with rebuilding after a hurricane.’”
That frosts me to no end, that the vast majority of politicians took the property tax windfall and spent it, rather than saving it for a public purpose such as you describe or, my preference, using it to reduce the property tax millage rates proportionately.
I am flabbergasted at the number of people who are leaving Florida because of the property taxes. Insurance is a big deal along the coasts, but not so much inland — however, even Orlando people are leaving. The reason: when they sell their home in order to buy another, for whatever reason, their property taxes increase 300-1,000%, depending on how long they were homesteaded in their old home. Retirees cannot handle that hit; while most stay in place, the ones who choose not to, more often than not see that they are better off crossing the state line for relief. The solution — lower rates across the board to level the net revenue from property taxes — was there all along and ignored. Now I hear more about people leaving my beloved state than moving in, though I grant that it has a lot to do with my age bracket. But, good or bad, the influx of boomers moving here for retirement ain’t gonna happen nearly as much as originally predicted. You can be sure of that.
There is a solution for this idiocy and it’s called market value assessment. Now before someone claims that it means your taxes go up automatically, here’s how it works.
Cities are legally required to levy a total tax burden equal to their budgeted spending for the year. Suppose a city has a total budget of $100,000,000. If the total asesssed value in the city is, say, $10 billion, they set a rate of 1%. The property tax rate is set by the city every year based on the budgeted spending and total assessment. No automatic tax increases just because assessment went up. If your taxes go up, it’s because the city council (which you elected) decided to spend more money.
Non-market property taxation results in all sorts of crazy inefficiencies such as people staying in houses that are too large for them, moving out-of-jurisdiction when they need to downsize, not moving to a closer location when they get a new job, new businesses scared away because newcomers get socked with disproportionate tax bills, etc.