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Trust This.
By Joseph E. Seagle, Esq. ● Feb 24, 2023
Smart Brevity® count: 4 mins...1065 words
👋 Happy Friday, the last Friday of this shortest of months. Today is National Skip the 🥤 Straw Day. Before accepting that straw from your server, reflect on 🐢 this video first, and make the Coral Keepers proud.
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1 big thing: Climate change threatens FL housing values
According to a new report, Florida’s housing market is the most overvalued market in the country when floods and hurricanes are factored into the equation.
Why it matters: Real properties’ values could tank over the next 30 years as sea levels rise and hurricanes become more violent.
Residential properties exposed to flood risks are overvalued by between $121 and $237 billion with overvalued properties located in coastal counties with no flood risk disclosure laws and where there is less concern about climate change.
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Low-income households stand to lose the most with price deflation; and
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Florida municipalities that rely on real property taxes for most of their operating revenue will feel the crunch of lower revenues due to lower valuations.
The report focuses on flooding, not wildfires, droughts, tornadoes, or earthquakes.
By the numbers: Over 14.6 million U.S. properties face at least a 1% annual probability of flooding, but this could increase to 11% as climate change progresses. Expected annual damages to residential properties are over $32 billion and are expected to increase by 26% by 2050.
The bottom line: The mispricing of housing markets that fail to account for this risk is causing a real estate bubble to develop endangering insurers, mortgage lenders, property owners, and governments.
Florida, with the most developed coastline in the U.S., is at the top of the list by a large margin at a $50.2 billion overvaluation.
Some suggested fixes from the report:
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Update FEMA flood maps and require nationwide transparency of information about potential flood losses during the sales and mortgage financing processes.
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Price flooding risks into mortgage loans.
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Continue implementation of the National Flood Insurance Program’s “Risk Rating 2.0”
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“De-socialize the NFIP by raising rates to burden the homeowners in flood zones rather than taxpayers who backstop the program.
Go deeper
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United Property & Casualty Insurance Co. went into receivership last week after higher-than-expected losses from Hurricane Ian pushed the company into insolvency.
Why it matters: Many investment properties and primary residences were insured by the company, leaving owners without coverage.
Slide Insurance Holdings, Inc., a Tampa-based insurance company formed in 2021 took on 72,000 of UPC’s 135,000 policies at the start of this month before it went into receivership. Overall, Slide has taken on over 200,000 policies of the companies that have failed since 2021.
What’s next: Citizens Property Insurance is expected to take over the remaining UPC policies for homeowners who can afford the rates after the Legislature’s latest changes that raised them to make them more competitive with the private insurance markets.
Yes, but: While there are alternatives for homeowners’ insurance needs, there is no evidence that the latest legislative changes are having any noticeable effect on keeping insurers in Florida. As more companies go insolvent, the pool of insurers continues to shrink, leaving homeowners (and their lenders) uninsured.
Go deeper: Tampa Bay Times and WFTS
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FHA announced a 30 bps cut in its MIP rate, reducing housing costs by an average of $800 for roughly 850,000 FHA homebuyers and owners in 2023. Housing Wire
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REALTORs are advising buyers to “marry the house and date the rate,” while lenders are helping buyers adjust to a 6%+ average mortgage rate by pitching incentives to buy down rates by one point for the first year, taking out adjustable rate mortgages, and even offering to cover the costs of future refinancing of the mortgage. The message: the home is for decades so long as you can stand the rate for a least a few years. Bloomberg
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Florida’s Legislature is considering legislation that affects title agencies. The bill would, among other things, allow agencies to act as escrow agents for funds in closings where no title insurance is being issued. The bill, if passed, also defines “closing services.” This latter change may be used by regulators to limit what can be charged for these services, prohibiting any other charges for copies, shipping, notaries, or anything else other than “closing services” and the title insurance premium. Florida Legislature
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The Texas Attorney General is investigating Home Title Lock for violations of that state’s Unfair and Deceptive Trade Practices Act. Texas Attorney General
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The housing market shrank in value in 2022 Q3 and Q4 the most since 2008, dropping by $2.3 trillion between June and December. But by December, the total value was still 6.5% higher than the year before. However, Florida did better than anywhere else with Miami’s prices ballooning 20% from the previous year. Bloomberg
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AI-generated picture from photo taken by writer
Speaking of AI, I finally gave in and downloaded one of those AI apps that takes your pictures and renders an avatar from them.
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In this case, I uploaded about ten pictures of Edward and told the app to draw a dog as a space traveler.
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This is one of the best of the 112 pictures the AI “artist” painted.
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It captures Edward’s curious look better than I could have done.
In case you’ve never heard of Laika, the first space-traveling dog, and how she paved the way for human space travel, here’s a song about her one-way trip.
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Be on the lookout for our next issue! 👋
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