Sushi Money

   Okay, we’re in a housing and credit crunch in this country.  Today Bloomberg has written a scary article about Florida real estate titled “Blood in the Water” in Florida Property Market.  A few things jumped out at me, namely locales that levy too heavy property taxes on homeowners, and legislators that “try to make things better” by regulating the insurance market.  Even if we were not facing a housing and credit/lending crunch, those two factors- high taxes, and heavy regulation, can cause irreparable damage to property markets.  The actions by the Florida legislators has caused insurers to either leave the State entirely, or to try and limit insured risk through diminished business (non-renewals) and increased rates in response to property damage potential from natural disasters…. i.e. hurricanes.   Florida passed two new insurance laws in 2007, one in January and the other in June, that requires property insurers to offer policies without windstorm or property contents coverage starting July 1.  A homeowner policy without that protection will cost far less than one with full protection.  For some homeowners, that may be just fine.  Insurers are scrambling to meet customers desires in this regard, but guess what?  If you’re buying a house with a mortgage, or are paying on your mortgage, can you just drop coverages without telling the mortgage company?  Not normally… and most lenders are hesitant to approve a loan without full property protection either.  Some are doing just that in the current climate, but as a homeowner I want full coverage  if I can afford it.  That’s the problem, and why Florida’s Governor had been aggressively pursuing the insurance companies.  Yet he’s created an adversarial relationship with insurers that really doesn’t serve consumers over the long run. Maybe it will work out… stranger things have happened. 

    Taxation is another issue.  By and large Florida offers a favorable tax climate as compared with the rest of the nation and the State has made legislative efforts (again!) to provide relief to homeowners. But some locales are not as helpful… If local officials think it’s necessary to aggravate a tough housing market by raising taxes, then guess what happens?  More people are challenged to live there, some want to leave and fewer want to come live there!  Businesses included.  That means lower tax revenues of course.  With all those empty homes, businesses and communities are challenged and people… residents, retirees, tourists, snowbirds, etc. are simply not there with dollars in hand.  That’s not to say that most people living in Florida are not permanent residents, because they are.  But when your State’s coffers depend on the money that a mobile society brings, it’s important to value those demographics.  The reason many retirees and investors flocked to Florida in the first place was both climate and financially induced.  With no state income tax and favorable taxation on retirement assets, Florida has offered a chance for a sunny and financially strategic quality of life in retirement.  But when those dynamics begin to change, and are exacerbated by legislation, taxes and difficult housing markets, you have a prescription for turmoil.

    I don’t want to make too much of the Bloomberg article because I suspect that in many parts of Florida, like many parts of the nation, real estate is doing just fine.  Realistically Florida still offers an excellent tax climate overall, and incredible quality of life… if you don’t mind thinking about hurricanes now and then.  There’s the rub, meeting your property insurance needs.   Hopefully the State will work with insurers instead of against them.  Florida residents cannot afford for their legislators to treat their insurance companies like the “big bad wolf”… the insurance companies must balance risk against profitablity and stability.  And housing will stabilize and pick up eventually.  While we wait there are also many people and investors looking to step in and pick up  distressed homes at fire sale prices.  Short sell specialists are making a killing but eventually the market will come back.   It always does… it’s just a matter of time and that may mean 2009 or beyond.  It’s also amazing that builders continue to build… if you’re in the market for a house in Florida, you can find some incredible deals out there.  More than taxes, the housing crunch, the economy… I think the psychology has simply changed in real estate markets all across America.  People are uncertain and unwilling to put their dollars into tangible assets until they see a stable market.  That will take time.

      What’s it really like in Florida these days?  You tell me.  My disclaimer for my written opinion is that I don’t live there… I just follow real estate market trends and read about the challenges consumers face with taxes and insurance.  But I’d love to hear from those of you who do live there.

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