Homeowner’s Insurance Rates May Drive Down Florida Mortgage Demand

Often overlooked in the decreased demand for Florida home loans this year? The cost of homeowner’s insurance in the state.

Rising rates, the chief economist for the National Association of Realtors said Friday, could drive people away from the Sunshine State.

‘”There will be a whole new set of destinations because of the hurricanes and the rise in the cost of insurance,’ David Lereah said Friday at the NAR’s convention in New Orleans. ‘People are going to think twice about wanting to live on the water.”

A decade of severe hurricanes that have pounded the Florida housing market, the Gulf Coast, Louisiana, Texas and places up the Eastern coastline, has increased the price of homeowner policies and the difficulty in obtaining them, Lereah said.

“If we could sift out all the other problems (hurting home sales), the problem that will remain is the availability and affordability of insurance,’ he said. “Start in southern Florida and work your way up to Maine.”

In Florida, which has had 12 hurricanes since 1995, the cost on insurance has risen “tenfold,”Lereah said. Even if Florida mortgage rates remain low, these costs must be accounted for. They’re causing some families to leave the state, he said, looking for protection from the storms and the insurance costs.

“We’re talking people who lived there 20, 30 years,” Lereah said. “A lot of them are moving to the Smoky Mountains.”

The Realtors refer to them as “Halfbacks,” Lereah said. They don’t have an interest in applying for another Florida home mortgage under these circumstances.

In California people are seeking safety in Washington and Oregon, Lereah said.

Louisiana, which was hit by Hurricanes Katrina and Rita in 2005, is currently having problems getting insurance for home buyers. Agents say prices have shot up from $1,000 annually to $3,000 or $4,000 annually, putting a damper on home sales.

“I think we need for the federal government to get involved and create some sort of backstop,” Lereah said. “If you’re a private insurance carrier you think twice about getting involved in an area where there is not a backstop.”