Florida Targets Second Homes For Insurance Shortfall
Some updates on the Florida housing market. “No signs point to a housing bubble in the Tallahassee market. At least that’s the thought from local appraiser Clay Ketcham. ‘If I knew if there was a bubble, I wouldn’t be here,’ Ketcham quipped. ‘I don’t think anyone knows that.’”
“The market here is doing well, he said. While there is a large inventory of homes costing $500,000 or more, there is still an active market for homes $350,000 and below. ‘I think there are some areas where you see some softening, but Tallahassee is strategically poised to grow.’”
The January median for Tallahassee was reported to be $175,500.
The Sun Sentinel. “The Florida Hurricane Catastrophe Fund is facing a shortfall and needs a rapid cash infusion to ensure there’s enough money for insurers to pay property damage claims from last year’s storms and replenish the account for next hurricane season, a state catastrophe fund advisory board recommended.”
“Whatever is decided, all of the state’s homeowners will ultimately pick up part of the tab because insurance companies are expected to pass on the additional costs to their customers. Already, Florida homeowners are paying down a $516 million deficit state-backed Citizens Property Insurance Corp. incurred from the 2004 hurricane season.”
“Owners of Florida vacation properties and second homes insured by Citizens Property Insurance Corp. would face a 25 percent surcharge under an insurance overhaul outlined by Florida Senate leaders.”
“The move to help keep the state’s beleaguered insurer of last resort from going broke after future hurricanes shifts a big portion of insurance costs to nonvoting, seasonal residents. Sen. Rudy Garcia defended the idea of charging owners of non-homestead properties higher rates. ‘We’re very interested in keeping our welcome sign up for the people who have vacation homes here,’ he said. ‘But should the people of Florida subsidize [nonresidents'] insurance costs?’”
“It’s unclear what portion of Citizens’ accounts are for non-homestead properties. Property records reviewed by the South Florida Sun-Sentinel indicate a substantial number of South Floridians could pay more under the Senate plan.”
“Of the 156,533 residential properties in Broward County east of Interstate 95, about 43 percent do not have homestead exemptions, property appraiser records show. In Palm Beach County, looking only at single-family homes east of Interstate 95, there are 74,506 properties, of which 25 percent are non-homestead.”
“The Senate proposal, similar to the House version, forbids Citizens from covering homes worth more than $1 million in order to reduce the company’s risk and the need for future surcharges. In September, Citizens covered about 5,500 homes valued at $1 million or more.”
Thanks to the reader who sent in the Sentinel links. The insurance issue gets to the heart of second homes and speculation. Why should the state insure thousands of redundant homes that are in harms way each season? Aren’t there enough resorts and hotels in Florida? The Tallahassee numbers show, these extra homes aren’t affordable for the people who live in the area.
I was always shocked by the boom that was going on in southern Florida ,especially after the recent weather losses .If another bad storm comes, dont be surprised if squatters/homeless move into these vacant houses .
I reported about a week ago that the 2nd largest inusurer is either stopping or not renewing policies, throwing thousands into the state run pool. Citizens is grossly underfunded and if another major hurrucane( read when not if) hits here, then the state will be screwed. The lucky ones not cancelled are seeing their premiums go up anywhere from 20-60 % on top of increased premiums last year.
The state has a major problem on its hands.
Further, the Insurance costs burden showdown isn’t going to increase demand ….
This is just a case of both socialist wealth transfer schemes and “don’t tax you, don’t tax me, that that guy behind that tree.”
First the wealth transfer. Structures don’t know if there’s a homesteader inside. Neither does the hurricane. Insurance is probability, exposure, profit and loss. This idea has all the moral authority of racism. Ahh, but these people are multiple owners so they can afford it. Yeah right and if they rent the property out? The renter gets screwed.
Then the “don’t tax you…” claim. Clearly the State Ins Agency is not charging enough. There’s an answer, charge everyone more. This is what the rest of us deserve. Our private insurance cannot exist side by side with a distorted system without costing more.
I’m also fairly convinced that all hurricane insurance is woefully undercharging based on risk exposure, again another national issue. We have an insurance bubble to go with our housing bubble.
I’m not sure if renters will get screwed as its hard to pass the cost to the renters with so many available properties for lease.
—AL
I am on the fence here. I know that every time there has been a cost increase from a public policy initiative I’ve successfully passed on more than 100% of the costs to my renters. I feel the overhead of supply keeping general rents depressed but $2500/mo cash negative tract homes trying to hold on until things change recent listings just don’t compete with the $900-$1100 true long term rental properties.
My renters pay what it costs not what they want to pay. If they could pay $2500 they’d have bought homes long ago.
My point is the coming flood of supposed new offerings as the bottom drops out of the resale market won’t change the real rental market because their financial model is broken.
One thing i noticed when renting in miami from moving from boston was that in my rental range, 2K about, that all the places i looked at was neg. The place i leased was at 2500 per month and the landload stated to my agent that he was paying 2950. total cost per month. I ended up getting it for 1825.00 per month, I might of got it cheaper if i had more time but i only had 2 days in florida to find a place before going back to Boston
Now in Boston it was a different story since most places went for asking price or at least my rentals went for the price i asked.
Well I think with the above information i see investers dumping or walking away if things go really bad in FLA as most are already have neg cash flow
Does anyone know what the cost is in Florida to insure a home against hurricane damage per $100k? Just curious.
My own opinion is that much like the discussed “greenspan put”, hurricane/flood insurance is unncessary unless of course your lender forces you to have it. The government (or more specifically, legal resident taxpayers) will bail you out from any national disaster. Why bother wasting money on insurance.
About 1%, plus another 2% deductible, if you need repairs.
This is based on structure cost, excluding land and foundation.
So, 200k structure, about $2000 per year, plus $4000 deductible.
That means $6000 out of pocket, if you need to do repairs.
This does not include FLOOD Insurance, which is separate.
I can confirm these estimates. My wife and I live in an area where one policy covers all perils (closer to the beach, you have to buy both a standard HO policy PLUS a windstorm policy … not to mention flood may be required depending on where you’re at).
We’re paying more than 2k for our homeowners policy, plus another $300 or so for flood (not required where we live, but purchased as a “just in case” thing). Throw in taxes, and we have a monthly escrow payment that’s almost half the size of the principal and interest. Bottom line: It costs a heck of a lot more to own down here than you might expect, once you add the TI part of the payment to the PI.
““Owners of Florida vacation properties and second homes insured by Citizens Property Insurance Corp. would face a 25 percent surcharge under an insurance overhaul outlined by Florida Senate leaders.”
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This is Brilliant! The snow birds will be flocking in now to buy all those extra condos in Southern Florida. Problem solved!
Guess this kind of legislation puts a dent in the theory that foreigners and retiring boomers will save the market. Tax them enough to scare them off (not that prices alone aren’t doing that).
As time goes on, Florida will become a 3rd world country (like those on here who say that about California). You need your passport to get into Dade County these days.
If I were a retiree, I’d look at the Carolinas or Georgia. Florida has lost much of its appeal.
Ha… Most of the baby boomers I know who are getting ready to retire and live in South Florida are doing just that. Selling their homes to “investors” and buying homes and land cash up in the Carolinas.
word up if you be gettin Katrinahed you gets to stay in da MO-tel
word up if you be gettin Katrinahed you gets to stay in da MO-tel
I forgot to add, not only has our home insurance premiums increased, but our auto insurance premiums have gone up as well due to the number of claims in the area. Even if you personally never made a claim, they raised your rates.
Welcome to Miami, enjoy your stay.
Off topic, but worth mentioning.
Another sign of the times for CA:
http://www.dqnews.com/RRCA0206.shtm
It seems every couple a days bad news strikes, I wonder how much longer the CAR spinners can handle this.
I don’t care what party you are affiliated with, if you believe in the founding American ideals, some guy with a house in the mountains in Pennsylvania shouldn’t be subsidizing the living costs of people on the coasts.
Beach property owners need to pay beach property costs.
I have a list of “unique cities” that some day I’ll make a post about, guess I’ll add tallahasee to the list!
What will this 25% subsidy to do the current floppers that can’t unload their speculative albatross’s. Oh what fun is it to ride in a FB broken house. Here come the Baby Boomers to the rescue. Gee, and a 6 yr old could have seen this coming. Alnd why should someone in Talahassee, where hurricanes probably aren’t an issue subsidize the people in MIami. Should do that stuff based on a county by county basis
I agree with arlingtonva - those who live in the path of hurricanes should be the ones who pay. OTOH, this picking and chosing among those who live there seems a lot like Prop. 13 in California.
What does everyone think the future of companies like this?
Freemont Investment and Loan
Are companies like this going to hurt? If so, how much?
I can only imagine that the inverted yield curve or a tightening one is killing them right now.
Its funny they mention Tallahassee. Its a town of about 200,000 people but yet they are building all these luxury condos that start around 300K for a one bedroom and up.
I lived in Tallahassee. 1/4 of the population are students. The average starting salary for a college grad is around 26K. The average income is extremely low. Anyone who lives there lives 20-30 minutes north of downtown. Unless you are on welfare or a student.
The local government thinks that building up all these high rise condos downtown is going to bring life into the area and create an “18 hour a day city”, not just a place that closes down at 5pm.
The truth is Tallahassee is really only active for 2 months during the legislative session. All the people buying these condos are state law makers & lobbyists who have a place to stay during session or just the investment.
Go to Realtor.com and look up condos in Tallahassee over 200K there are all these listings that just show artists versions of what its going to look like, some even have a picture of the picture of what an artist thinks its going to look like but yet they are asking 250-300K starting.
I spent a couple weekends in Tallahassee prior to being dispatched to Niceville, to do some FEMA sub-contract disaster inspection work relevant to Hurrican Ivan.
Extraneous to the Fighting Seminole Stadium, I fail to see the what the attaction is.
Definitely low-rent.
$300k for a one-bedroom condo? Must be the laundered cocaine money moving northward.
As I’m a renter in Miami I was curious if we have any home owners that have seen their Wind policies increase and what is the added cost? I know that FPL has increased the rates for power
—AL
Please educate. Is the “Wind policy” the same as the hurricane insurance?
BayQT~
I ask the question because I live in Norther Ca but own a townhouse (6 yrs) in Newport News, VA. The community is not in a flood zone, but I do have hurricane insurance. In 2003 (hurricane Isabel) I read through my hurricane insurance once again to calm my nerves, but realized that it didn’t cover water damage. Thus, I quickly purchased flood insurance (Only $260/yr because I am not in a flood zone)…which, of course, had a 30 day waiting period before it went into affect. After Isabel rolled through and I was able to speak to my property manager, I found out that there was flooding all over the place…not my townhouse, though (whew!)….but a neighbor had a tree fall on it’s roof. A friend in another part of town stayed in her house and sustained cuts from windows being broken out and other injuries. I was lucky that season. It was the first time that I felt so incredibly vulnerable with regards to hurricanes and the locale of my property.
If Wind coverage is yet another type of insurance, I’d like to look into that, as well.
BayQT~
correct…
*Correct*, that it is the same or another type of insurance coverage?
I wonder if Wind coverage is specific to certain states/areas, though? This is what I found after I posted the question above:
Wind deductible - a separate deductible applicable to loss caused by wind.
Hurricane deductible - a separate deductible applicable to loss caused by wind due to a defined hurrican or tropical windstorm.
High Windstorm Deductible - a separate deductible applicable to loss caused by wind in excess of a defined wind speed, but not limited to a “hurricane” windstorm.
SOOO many options…and things to miss when you think you are all “covered”.
BayQT~
I have 3 policies in Florida: Homeowners, Wind, and Flood. Each is a separate policy and a separate premium. Confusing and hard to keep track of.
After I left FL this FL, my policy didn’t get cancelled because my insurance agent’s office got totalled, I got a notice forwarded to me telling me my insurance rates were going up about $1000 a year. Add that to the $1200 increase from the year before when I had to scramble to find a new company after the one I had pulled out of FL after Frances, Jeanne etc.
My taxes and insurance would have been more than my mortgage payment.
Brace yourselves
Whatever the underlying cause, most scientists agree that people will need to brace themselves for stronger hurricanes and typhoons in the coming years and decades.
One would think that this kind of information would matter to those building and buying. In fact, since Katrina destroyed NO, there have been many, many articles about the upswing in the number and strength of hurricanes in North America in the coming years. I don’t understand why builders don’t take this information into consideration….or do they care?
BayQT~
Great,,,, my lease on this house in North Miami is up in June, I was thinking I’d move into on of those new condo buildings, lots of investors trying to rent out, now i’m sure going to get out of this house after living through the 2 hurricanes last year and not having power for 2 weeks…
Ah.. for the good old days……….
LAST ONE OUT OF FLORIDA, TURN OUT THE LIGHTS
no need to turn them out-the hurricanes will do it for you!!
OK, I see a lot of under-informed of speculating on the coming insurance disaster in FL. In reality, there are three reasons why some policy premiums are skyrocketing:
1) You live on a barrier island or within a mile or two of the coast;
2) You have ceramic roof-tiles, easily damaged and expensive to replace.
3) You have an older home that is not concrete block and stucco and/or was built before Andrew’s wake-up call.
Probably 90% of the homes built in the last five years do not fall into one of these categories. I live in Port St. Lucie in a CBS house and pay $950 per year to insure $180k worth of home. Most people pay something similar. Flooding is extremely rare.
Yes, the insurer of last resort is underfunded. Do you think it might be because they are insuring million dollar homes on the taxpayer’s dime? Subsidizing because you’re poor, I’m OK with. Subsidizing because no insurance company in their right mind will write the policy I am not. And no, I don’t want to subsidize the insurance on your vacation home on a barrier island, so get off this “non-resident discrimination” trip. If you can’t afford to fix/replace the property, don’t buy the property.
Why should I have to pay? I am entitled to the house on the beach!
