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Florida housing in trouble?

Posted by: Dean Foust on November 1, 2005

Despite the fact that he doesn’t work for one of the name-brand Wall Street investment houses—or maybe because he doesn’t—Dick Bove, an analyst at Punk Ziegel & Co., is one of my favorite bank analysts. He writes research like a good journalist—speaking his mind, pulling no punches.

In a report released today on Florida housing, Bove predicts that the “pressure on (Florida) housing is likely to be sizable” due to “a series of major threats.” Chief among them: Hurricanes, which Boves belives will have a large ripple effect on housing…

Bove says he's been hearing lately from bankers in Florida that yet more insurance companies are going to pull out of Florida in coming months (insurers can't pull out for 60 to 90 days after a major storm, so they can't leave so soon after Wilma, but they're already plotting their escape). Even in aprts of Florida where there haven't been any hurricanes, Bove hears that insurers have already begun to cancel some policies and increase rates. Bove also wonders whether immigration--which has been the driver behind Florida' real estate boom--will wane if new residents get spooked by the never-ending hurricane season.

What's more, Bove notes that communities hit hard by the storms are going to have to raise revenue to pay for repairs to the infrastructure that aren't covered by federal programs. How will they do it? Since there's no state income tax in Florida, they'll do it by raising property taxes, he predicts.

Bove also thinks many homeowners are going to have to take a serious look at building a "safe room" onto their house--one that can withstand the impact of a Category Five storm. So more costs there. Oh, and lest I forgot, higher interest rates for people with home equity loans.

So to sum up, here's the picture that Bove sees facing homeowners in Florida: Higher homeowners insurance rates, higher property taxes, and higher interest rates on home equity loans. Other than that, everything's fine in the Sunshine State.

Reader Comments


November 1, 2005 7:19 PM

Didn't I quote hurricanes as a major problem in my comment on 'Florida housing a bubble?'

My boss said his homeowners insurance was raised from 750 to 1500 a year after last hurricane season. He lives inland as well outside of all flood zones. There are lots of complaints about people who can't get insurance except from the public (Citizens) fund.

Mark Muller

November 3, 2005 12:14 AM

I see inventory building in many markets in Florida... suggesting a flattening of prices for the time being. Despite the hurricanes, demand is still strong. I believe that real estate will do best in areas that have lagged the rest of the state in appreciation - areas that have yet to be discovered by the masses. I personally believe in remote locations such as North Captiva Island as one of those places.


November 3, 2005 1:21 PM

More than 1/2 of the populations of those who in Florida aren't from Florida so now if the Hurricanes is an issued I pressume people are just going back and/or move to less risk State b/c they won't be able to deal w/ the insurances, FEMA and any other public/private helpers. I see Florida ten years will be Florida twenty ago.

Apartment Locator Houston

November 7, 2005 11:00 PM

It is unfortunate to see the disaster in florida. I hope to build many apartment building and housing for many individuals and families.


November 20, 2005 8:47 PM

The notion that the Florida RE market will be negatively impacted with respect to rising home and condo prices, should be about proportionate to the mudslides, earthquakes and massive fires in California. Just about zero.

Florida has the nicest beaches in the USA, the best family tourist locations, the most and best airports, cruise lines, USA, European and South American investment for second homes, and most importantly, Florida is running out of buildable land.

Real estate in FLorida has only one direction to go. UP.


November 21, 2005 10:42 AM


"and most importantly, Florida is running out of buildable land."

Nothing could be further from the truth. Florida has PLENTY of land for building. This past weekend I drove up I-75 from Tampa to Gainesville and I can assure you there is plenty of farm land available for building. The Tampa area has a ton of land too....south of Brandon is still tropical fish farms and tomato/orange groves. North of Brandon is hobby farms; north of Tampa is horse farms. There is hardly anything south of Sarasota besides Ft. Myers and Naples. Miami might be tight for land but that is not the case in the rest of Florida.

Best tourist destinations does not equate best living conditions. While some Florida costs are low (no state income tax) it's made up for in other costs (hurricane insurance, car insurance due to transient population, etc). Housing costs, which were traditionally low have reverted to become some of the most expensive in the country relative to income levels.

In short, barring a miracle, Florida is poised for either a housing crash to correct prices back to levels supported by market fundamentals or an employement boom with high paying jobs. Last time I heard about jobs being created it was a call center paying $9 an hour. Certainly not a wage that can support a $250,000 house.


November 25, 2005 7:04 PM

I live in Tampa, Florida in smaller house a top community (my current section in the community is the oldest and most investor driven)and I plan on upgrading to a nicer house within the same community in a much better section. However, I was wondering about an existing home buyer who has had their first home for over two years and would like to upgrade as soon as possible. Do you think it would be wise to upgrade now before interest rates go up or should I hold off until the market tumbles. Another, option, however, a bit riskier of an option is for me to attempt to sell high now and rent in an apartment for some time to allow things to drop. However, if they do not drop at this crucial time period but increase a bit longer and level off then my purchasing power is diluted substantionally. Any opinions?


November 27, 2005 1:09 PM

Running out of buildable land? Have you been on the Florida Turnpike? It is like being stuck in the middle of nowhere, land everywhere. As far as the best tourist destinations and cruise lines. Geez, I like eating filet mignon but I don't want to eat it everyday. So what, are you going to Disney World every weekend. People take vacations to destinations that aren't a couple of hours drive in either direction. This guy sounds like a real estate agent or condo flipper. Get real.


November 29, 2005 11:27 AM

Jeff -

I also live in Tampa. For your situation it sounds like the best course of action may be to sit tight for the time being assuming you have plenty of equity in your current home. If not, I'd sell at the top, rent cheaply for a year or two, and buy low. Of course there are risks involved but I have certainly seen a much slower market around here since August. People want stupid money for shacks - Florida is slowing down, and although the St. Pete Times article today says the market is very strong, I believe that is optimisim and not realism. Tampa's economy is not vibrant enough to support the high prices of real-estate.


December 15, 2005 6:30 PM

I lived in Orlando and was forced to sell my property as no insurance company wanted to insure me after the hurricanes. I am yet to understand what the sudden blast in realestate is all about because the last time I checked I could not repurchase a another halfway decent house based on my salary which has been the same for the past 7 years.

Mr hinkley

February 2, 2006 10:30 PM

Now the wealse insurance companies that are left wont insure a house built before 95 which is about 75 percent of the houses in ft lauderdale ,palm beach and miami.Those are the areas people want to move to not tampa or orlando where the mullet doo rules.This is where there is no land left. So now the insurance companies can discriminate against age of your house, they can also tell you how much it costs you to rebiuld which they dont really know there guessing, and they will determine how high your coverage should be even if you dont need it because your mortgage is only 130,000.The state need to step or better yet let them all go bellie up and get out of florida.They could easily charge
10 dollars to everyone across the united states to keep up or 100 over a year to make up for hurricanes and earthquakes.its not like every state has natural disasters.


February 5, 2006 2:14 AM

Florida has had a couple quarters of +20% yearly appreciation -- historically, that won't hold up.

See the historical data here:

Brian (in Tampa)

May 4, 2006 9:07 PM

Hurricanes or not, babyboomers are not retiring to spend there golden days in the frozen north. Are there other warm weather destinations besides Florida, sure. But few are less expensive, still. Many snowbirds won't even be "in town" when the winds blow. Insurance is a serious problem and will only get worse BUT the state has seen their coffers over flow from the runup in real estate values and the politicians won't let the goose that laid the golden egg go down in a storm. Yes there are still large areas of land which could be developed but much of that is in the interior and the majority of the population prefers to live close to the coasts, no surprise, and the land there is limited. Interest rates, not hurricanes will take the sizzle out of the too hot housing boom. The froth in the market will dissipate, prices will flatten, for a while, and sanity will return and that will be a good thing. But if you're betting on the doom and gloom then you need more luck than those facing the winds (of change).


May 7, 2006 11:45 AM

I am a Florida Realtor/Baby Boomer/Empty Nester who moved here in 2003. At that time Florida Real Estate was a bargain!!...I had cashed in on my high home price in Boston!!...and proceeded to invest in Florida.....Yikes, it was good move!!.....I have since sold all my Real Estate Holdings and Rent a beautiful home for Cheap!!
Why???....A good investor will buy right...then sell right....THE BOOM IS OVER!!!.....

Why? Lots to Blame..For One...The Save Our homes Act, causing the most unfair property taxes in the country!! ...( Even my Baby Boomer friends in Taxachusetts will no longer mover here)...niether can most Floridians afford to move. Even into a similar home to the one they currently own. Our legislature is only going to give this a band aid solution...Sorry Folks..this is killing our market....Wait till this November's tax Bill comes ...OUCH !! It will be too late by then!!...Most "out of staters" don't know about our property tax problems!!

As a REALTOR , I value my reputation in Florida and tell my buyers (the investors are gone!).....Be careful...! Do not buy a condo/townhome...the price will ( actually is ) Fall!!
Single Family is a safer investment...but only if you treat it "as your home" for the long term...also,if your only going to have a job in Florida for a few years...Renting Is Best!( get the hint investors...Buy Rental RIETS)

Great Home Buys are now arriving here in Central Florida...the Smart investors are out of the game..the headstrong Investor/Seller's are holding on against hope!!.....The seller's are not going to win this battle ...the laws of economics are taking over....The home builders are in trouble...and are releasing the bad news piece meal ( trying to save thier stock prices!!)
I represent my buyers to get only the best possible price!!
Floridians who have never seen the "low ball offer" ..will have to get used to it!! ( Sorry Sellers)

While housing bubbles do not Pop...they do loose air...
My Advice;...Your Real Estate decision must be for the Long term..."Buy and Hold" five to ten years minimum...Or sell now!!!!! for whatever you can get as quick as you can get it!!

Seller's/Investors take what you can...don't be greedy...your making lots of money!! Remember the old saying....."In a Fire ...Only the first people to the exits are the ones who survive!!"...............
(Yes ...I always check where the Fire Exits are located in a night club/casino too!! Do You??)


June 27, 2006 6:03 PM

Two years ago my wife and I saw a ad on T.V help save floridas history , help restore florida, So we thought about it and purchased 1910 florida Plantation home and started to restore it..the insurance company sent someone to the house and they determine that it was a high risk and cancel the insurance, I have payed these people for 32 years with no claims and they just cancel the insurance. I have 100,000 left to pay off on this place the bank is going to force the insurance on us and I hope I can swing the payments, But one thing is I will see this through and finish this house, My wife is going to bail out but as for me I'm going to go the distance and stay. If they take it from me or I die at least I finished this place and then maybe someone will see the beauty that was florida at one time ....


September 12, 2006 12:35 PM

I sold at the peak in California and went to Florida to buy a home. Bringing 300k with me to Brevard, I wanted a nice home beachide that didn't need any work. I couldn't find one. The very cheapest houses were 1300 square feet, in need of tens of thousands of dollars in repairs, and were all priced at about 299k. For anything in great shape you had to pay at least 360k or more, and that didn't include a pool.

So we bought in Georgia instead (where prices don't decline because everything is about a hundred bucks per square foot, big or small, new or old.

Our 300k home is now worth 350k, but the houses we looked at in Florida have dropped. Indialantic, Indian Harbour, Satellite Beach all have remodeled houses, some with pools, for 250-300k. Waiting paid off for us. We're still planning to move to Florida, but we're waiting until the market hits bottom. When will that be? We don't know, but it will level off when it gets there and give us time to find the right place.

And insurance? We're not buying any (only liability in case a neighbor comes over and falls off the porch). A hurricane has never breached the dunes in Brevard, and even if it did, the land and concrete block frame would still be intact. I'll pay for the dammages myself, thank you.

When the beachside prices hit 100 dollars per square foot (and the inland houses 75) you'll know the market has bottomed out. I've been studying this market every single day for five years. That's how I turned 20k into 350k since 2001.


September 13, 2006 3:00 PM

Anecdotal evidence (they are mushrooming on the web these days):

One of my employees who just moved to Orange County, California from Florida has this story:

He purchased a newly contructed residence near Sarasota for around $200k in 2004. He listed it for $340k just before he moved in March'06 and has now dropped the price twice to below $299k in the last few weeks. He is finally seeing some walk-throughs, but no offers yet.


September 14, 2006 8:47 AM

If he would just lower the home to a fair price, he'd probably sell. Why on earth does he feel he should see a 50% increase in two years. Used to be you prayed to break even on your improvements to a house. Now people think they are entitled to so much.

He probably will continue to have problems selling. The specuvestors(flippers) bought his price range home more than any other. The market is flooded with homes like his. According to John LaFabregue at Re/Max properties in Sarasota, just 4.9% of listed homes sold in August. From my observations it's the higher end homes that are selling. He should cut his losses and get out! Although it looks as if he has some wiggle room before he's at a loss!


October 24, 2006 3:43 PM

Yea right 100 per sq ft on the water it could happen (not)

Tex Mex

March 13, 2007 1:09 PM

Florida real estate prices traditionally don't change much, first because so many new houses are always under construction over its vast scrub-pine and palmetto landscape, and second because many who move there end up returning north -- as I did. And why would anyone flee that advertised paradise of carefree, endless summer? Because the Sunshine State is in reality a glorified swamp, crawling with bugs whose acid blood takes the paint off cars, and snakes slithering in lawns that have to be mowed twice a week because plants grow like magic beans in the sub-tropical climate. Pets can prove a delicacy for alligators. Every day at tea-time, thunderstorms drop the temperature but raise the humidity, leaving inhabitants either feeling lazy outdoors, or feeling confined indoors with air-conditioning. Tornadoes and hurricanes occasionally erase towns and villages (particularly mobile-home parks), making it difficult for everyone to get insurance. And social life for retirees? Everywhere the elderly sit on lawn-chairs in the shade of residential garages with the door up, watching the traffic, bored as zoo animals. So I suspect that the recent, uncharacteristic jump in Florida real estate prices was simply speculation fueled by Alan Greenspan's basement interest rates. Now a correction is dropping prices back to the status quo, with enough foreclosures (love those ARMs) to exacerbate the trend. The boom certainly wasn't because the peninsula, a great place to vacation, suddenly became a more congenial place to live.


May 11, 2007 3:44 AM

The #1 reason for the Florida real estate collapse has nothing to do with subprime woes, hurricanes, or retirees.

The #1 reason for the Florida real estate collapse is the dissappearance of drug money thanks to post-911 legislation and international pressure on the island nations to conform to international banking standards, which effectively stopped the flow of big money into huge Miami banks.

According to Garreau's "Nine Nations of North America," the drug economy in Florida was larger than tourism, agriculture, and manufacturing combined, even as far back as the 1980s.

It was drug dealers who started the speculative boom in south Florida, as they had stacks of cash to spend and little else to spend it on where it would be safe. That lead to mom and pop buying up three or four condos and houses at a time, thinking they would make a million dollars on a minimal investment.

Now that the drug dealer's money is effectively barred from entering the country, housing prices in Florida will continue to fall until they reach the levels they would have been at if there had been normal growth for the past three decades, i.e. 3 to 5 percent backdated to the 1970s and 80s.

Of course, most Floridians won't confess to these facts as the drug culture has always been a dirty little secret that Floridians keep hidden in the back room, like so much soiled laundry.



August 1, 2008 12:11 AM


Florida real estate prices traditionally will be not change much, first because so many new houses are always under construction,second many people move there end up returning north. Every day thunderstorms drop the temperature but raise the humidity. Tornadoes and hurricanes occasionally erase towns and villages.



Florida Treatment Centers</a

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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