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Following are some emails from George Pintye, yet another real estate broker
contact of mine from Florida. A few links, comments, and one image were added
by me.
I am a Real Estate agent in Hernando County, Florida and a confirmed Bubble-ite.
I'm writing in hopes you will consider addressing an issue of paramount
concern for the Florida Housing market on your blog: the coming Hurricane
season and the perilous position of the Homeowner's insurance industry in
Florida.
It's an item that doesn't get much coverage outside of Florida, but the
consequences may be national if it comes to pass.
As you may or may not know, many major insurance companies have decided
to limit their exposure in Florida over the past few years and have dropped
policies in high risk areas. Allstate and State Farm in particular are proceeding
with a systematic & orderly withdrawal from the state.
Its not just claimants of hurricane damage that find themselves dropped,
often long-time policy holders who never filed a single claim, but happen
to live along the coast get their notice of termination out of the blue.
Many of us with private coverage are grateful we haven't been kicked to the
curb (yet) by our respective insurers and absorb the yearly hikes without
complaint because we know the alternative of Citizens coverage is much worse.
Citizens, as you may know, was created as an Insurance company of "last
resort" following Hurricane Andrew. It was never intended to be what it has
become: the primary insurer of new & resale home purchases along coastal
Florida. By all estimates, it is in trouble.
According to the Florida
Insurance Council Citizens Property Insurance is now facing a deficit
of more than $1.7 billion for the 2005 hurricane season, three times the
$516 million deficit from 2004 that produced a 6.8 percent statewide assessment.
In addition, the Florida Hurricane Catastrophe Fund confirmed it will face
a deficit from 2005 as well, currently projected at $264 million. So, even
without a single hurricane coming through this year, Citizen's policy holders
can already count on a bump in their premiums next year. Not like the 60-100+%
yearly increases they've had to weather the past two years wasn't bad enough.
Mish, 2006 might be a watershed year for my state. Even without the threat
of an active Hurricane season, property values are destined to head south
because of rampant overbuilding & irresponsible speculation. What will
happen though if Citizens is overwhelmed by claims from a major catastrophe?
They can't keep passing the cost onto the policyholders, simply because those
policyholders are already stretched to the limit financially, especially
elderly on a fixed budget.
Will the federal government step in? Will the private carriers be forced
back into writing policies? What happens to property values if the entire
insurance industry collapses under the weight of a major catastrophe (or
heck, even a couple of moderate ones) because loan availability declines
significantly?
It won't take much, I assure you, to push Citizens Property into insolvency.
There are still people with outstanding claims from 2004 that have yet to
receive their checks from the company, and here we are in 2006 facing a Hurricane
Season that by all accounts will be just as active as last year.
I hope you can find the time to address this issue on your website, as it
is already impacting the housing market in my state, and hangs like a specter
over Florida's future.
Thank you for your time,
George Pintye
George followed up with a piece on sinkholes. Some names and situations in
the following email were removed or changed by me to protect the innocent (or
do I mean guilty). I also added links and an image.
Since I emailed you earlier this morning, I found out that a good friend
of ours just got a notice from his insurance carrier today. They will not
be renewing his policy once it's up in June (guess they'll take a pass on
this Hurricane season). He paid $1,500 last year for her policy just to give
you some perspective. Many people are paying between $2-3k/year for coverage
through Citizens, and we're a relatively average county with a median home
price near $200,000.
In addition, our county has an inordinate number of sinkhole issues which
are also causing the insurance carriers to run for cover. And these sinkholes
are being made worse with the dry winter and spring we've been having. To
my knowledge, if you buy a house in Spring Hill, FL you can't find a private
carrier anymore. State Farm will put you on a waiting list that is about
2 years long.
Here's an article about a recent slew
of sinkholes forcing families out of their homes.
 SPRING
HILL - The first sinkhole tore a 40-foot gash in the ground early Friday
afternoon. Then another appeared across the street, and still another on
a nearby property.
By the end of the day, six sinkholes had cracked roads, swallowed the
back end of a cement truck and threatened the stability of as many as 10
homes in this southwest Hernando County neighborhood.
The sinkholes forced four families to evacuate and rattled other residents
in an area already reeling from hundreds of sinkholes and the corresponding
spike in insurance rates.
Oh, and did I mention we're a true bubble area? For years, Hernando County
was a refuge for retirees. But in the last two years, home values have doubled
and speculators have overbuilt like you wouldn't believe. We're running about
an 18 month inventory of new (what I define as 2005-2006 built) houses, and
that's just what's in our MLS. That number doesn't include the hundreds of
builder spec homes, FSBOs, and homes still under construction.
And its not if my area needed this insurance fiasco. We already are destined
to have a rough time during the coming housing downturn. Our main industry
is, you guessed it, housing. We don't have much of a local economy save for
service & retail. We don't manufacture much to my knowledge, and people
certainly don't move here for the job prospects. We lost most of our Tampa
area commuter-buyers last year when gas hit $3/gallon. Hell, its practically
that high now. Many agents are already withering on the vine as the number
of buyers dries up.
It's the perfect storm of calamity for any real estate market, and we are
at the center of it.
I appreciate you considering my suggestion for blog piece. In the future,
I'd be happy to keep you apprised of the situation down here, though I think
the two of us know which direction its headed.
Best Regards,
George
Just in time for Easter I received this update from George about Citizens.
Hello again Mish,
I wanted to send you a couple more articles on the calamity that is Citizens
Property Insurance. I guess whenever you hand over the reigns to government,
it will always find a way to screw things up. Compare and contrast Millionaires
Bank On Citizens with Too
much fraud, too few remedies for Citizens.
On one hand, you have the rich getting a discount, and on the other, you
have the middle class getting squeezed out of homeownership. It's truly mind-boggling.
Why I haven't seen this issue brought to national attention is beyond me.
It's more intriguing than Enron ever was, and the fallout after a possible
Citizens collapse would be even more devastating.
Thanks again and enjoy your weekend,
Best,
George
Thanks George!
And as long as we are talking about Florida, let's take a good hard look at
Panama City Beach where Sales
as hot as afternoon sand cool down.
Several developers have put plans on hold in this Florida Panhandle town,
some after starting construction, waiting for better times. Condo prices
have -- hold onto your beach umbrella -- stagnated or even dipped. Much of
Panama City Beach is for sale.
A year and a half ago there might have been a handful of beach condo units
on the market, real estate agents say. Now there is a backlog of over 2,200.
More than 250 of them are listed for $700,000 or more. Look-alike half-million-dollar
units are for sale up and down the strip.
Many blame a building frenzy that outpaced even the feverish speculative
buyers who swarmed here from places like Birmingham and Atlanta, a six- or
seven-hour drive away. The median price for condos sold in Bay County leapt
130 percent from 2003 to last year. But when the potential for quick profit
didn't continue to soar, the market sputtered.
About three years ago, Darrin Quick, a Dunwoody software salesman, put money
down on three condo units in planned towers.
He bought in early, in the low $200,000s, and watched the price of units
like his triple and then dip, though he says they remain above what he paid.
He still expects to be able to sell the condos -- still under construction
-- at a comfortable profit.
He's not worry-free, though. He was glued to the Weather Channel, gut clenched,
every time a hurricane twisted off the coast last year. He expects the towers
to survive a storm, but he worries about temporarily losing the beach's brilliant
sand and area restaurants. Hurricane predictors say a current cycle of stronger
and more frequent storms could last 20 years.
"My other big fear is that they may be overdeveloping" the Panama City Beach
area, Quick says. "You kind of hate to see it turn into a South Beach thing
with high-rise after high-rise."
Real estate agents in the Panama City Beach area say some banks are putting
fresh limits on pre-construction sales in hopes of avoiding investors' becoming
overextended.
A few developers are scrambling to sell their in-progress projects or trying
to recruit partners to get them over the financial hump, says Zepponi, the
real estate agent. Other projects have been halted. Motels or other businesses
that were closed after they were sold to make way for development sit vacant.
Miracle Strip Amusement Park, once a staple for beach tourists, is among
the closures where construction of a development that includes condos has
yet to begin. Club La Vela, a giant nightclub known for wet T-shirt contests,
remains open after plans for a condo tower there fell through.
Says Janet Roan, a local real estate agent, "Now is the time to buy. It's
a buyer's market."
Zepponi advises condo owners to avoid putting their units on the market
now if they can avoid it.
"If people would stop this panic, things would turn around sooner," she
says.
Check out some of the quotes from that article. They are priceless.
- "My other big fear is that they may be overdeveloping"
- "Now is the time to buy"
- "If people would stop this panic, things would turn around sooner"
Where do these dimwits come from?
Now is NOT the time to buy. Perhaps 3 or 5 or even 8 years from now will be
the time to buy but certainly not now.
Check out the fear that they "may" be overdeveloping. Is there any freaking
doubt about it? By the way, his big fear is misplaced. Since that buyer's condos
are still under construction his big fear ought to be that builder goes bankrupt
and just walks away leaving a bunch of totally worthless half built towers
standing as a monument to stupidity.
Stop the panic? Pray tell when did it start?
Let's make a list of Florida attractions.
- Hurricanes. check
- Sinkholes. check
- Condo Mania. check
- Unsustainable Appreciation. check
- Clueless Snowbirds. check
- Wells Running Dry. check
- Earthquakes. no
- Unbearable Heat and Humidity. check
- Insurance Problems. check
- Mudslides. no
- Termite Problems. check
- Severe Affordability Issues. check
Florida is ground zero for housing bubble fallout, but rest assured the problem
will spread. Trapped buyers have not yet begun to panic. They will.
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