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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.
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.