Rising Flood Insurance Rates Sinking Sales in Florida
December 31, 2013
A big hike in flood insurance rates has forced home buyers to recede from the market in some areas, drastically hampering home sales, according to reports.
"The market dried up — it died," says Shirley Davis, a home owner in St. Petersburg, Fla., who has been trying to sell her $175,000 ranch-style home. The now-nearly-$4,000 in annual premiums for flood insurance on her property has caused buyers to flee. "Now, [buyers] call and the first question is, 'Is it in a flood zone?'”
The Biggert-Waters Flood Insurance Reform Act rate hikes took effect Oct. 1, leaving many home owners in flood-zone neighborhoods facing a big raise in premiums. The law nixes subsidies on millions of older homes nationwide. Florida leads the nation in the number of subsidized policies.
The rise in premiums is to help offset the National Flood Insurance Program’s $24 billion debt.
But since Oct. 1, sales in flood-zone areas such as Shore Acres, the Pinellas beaches and inland St. Petersburg, all in Florida, have dropped to some of the slowest pace in years.
"We're getting nailed big time," said RE/MAX managing broker Bonnie Davis. "The real estate market here had come back so strong. … Now, sales have almost come to a complete standstill."
Several homeowners’ insurance rates, when taken off the subsidy, could increase by about 20 percent a year. For a home buyer, however, the subsidies could be removed all at once and rates could go up anywhere from $2,000 to even $10,000, the Tampa Bay Times reports.
"There's so much uncertainty floating around and misinformation, and it's affecting people's thought processes," says Brandon Rimes, a RE/MAX real estate professional in Florida. "When people start getting scared, they go into stalemate."
The insurance panic has led some real estate professionals to take other steps to get a home sold. For example, a few agents have reportedly turned to investors and international buyers, who often pay with cash and can “self-insure” to avoid high insurance rates. Some real estate professionals have also packaged flood homes to sell in bulk to investors.
“In some cases, agents have agreed to sell a coveted non-flood home only if the investor agrees to buy a home in a flood zone, too,” the Tampa Bay Times reports.
Source: “Flood-insurance hikes ravage Tampa Bay neighborhood home sales,” Tampa Bay Times (Dec. 29, 2013)
Updated: November 20, 2018