October 11th, 2013 categories: Real Estate News
What's happening with flood insurance? How is the new flood insurance affecting home prices in St Pete and on the Gulf beaches? What should I do about the new flood insurance rates? These are questions we get nearly every day.
Homes built before 12/31/74 will no longer have subsidized flood insurance rates. All flood insurance policy renewals after October 1, 2013 will need to have a flood elevation certificate in order to determine the rate for these properties. We've heard of premiums ranging from $4,000 to nearly $30,000 – and that's per year, and only provides $250,000 of coverage. Florida has more affected properties than any other state and Pinellas County has more affected properties than any other county in Florida. As you can see by the section of the Property Appraiser's map that is printed here, it's not just waterfront properties that are affected. Many homeowners paying cash or having no mortgage will opt to self insure.
We haven't had enough sales data to make any conclusions about the drop in value of homes with high flood insurance, but we do know that it means that the loan a buyer can qualify for will be reduced and that buyers are asking what the new flood policy rate will be and opting out of looking at or making offers on homes with high flood insurance rate increases. Some buyers are using the new Florida sales contract to put a maximum premium they'll pay – if the premium is higher, they can cancel the contract.
For homeowners living in their home as a primary residence, the full rates will be phased in, with premiums capped at an increase of “only” 25% per year. If your home was built before 1975, get an elevation certificate and discuss options with your insurance agent. Perhaps you can raise your deductible to lower the premium. By October 2014 homes that were built in 1975 and after that are “grandfathered” because they were built to code at the time of construction can expect to see major increases as well. FEMA is having new flood maps drawn again, so we'll have to wait and see what happens with “base flood elevation”.
Many people, including legislators, did not realize what effect the Bigger-Waters Reform Act of 2012 would have. The required affordability study has not yet been completed. Florida residents have paid in nearly 4 times as much in premiums than they have collected in claims. There is some consideration of Florida withdrawing from the federal program and setting up something for Florida alone.
As Confucius said, “May you live in interesting times.”