By Dennis Sweeney, Executive Vice President of the HBA of Rockford
On the heels of the tragic pictures of the hurricane natural disaster in Florida and North Carolina are tragic pictures of the wildfire disaster in Southern California. The latter are stunning. For block after block, there are piles of ashes. Nothing recognizable is left of homes and businesses except the chimney. The incongruity of the video of a burning bank, with cars driving past on the street and no firefighting equipment present, was so bizarre. This doesn’t happen in the United States.
Recent year-over-year national home price appreciation statistics show the adverse impact that repeated hurricane hits have had on the Gulf Coast of Florida around Fort Meyers and Cape Coral. Year-over-year average property values have decreased. Not every property has decreased in value, but enough have decreased in value to pull down the average. That is significant.
Reasons given are: 1) cutting losses and moving to a different location 2) inability to obtain affordable home owners insurance 3) inability to obtain a mortgage 4) tired of cleaning up and rebuilding 5) any combination of the above. And Florida is considered a good state to live in for the cost of living, taxes, and public sector services and expenses.
Now comes the total destruction of communities in southern California, which like Florida is a very desirable place to live, but more expensive in terms of taxes and other public sector expenses and the cost of living. As a result of state caps on insurance premium increases following previous natural disasters, insurance companies were already pulling out of California before this disaster. This impacts the ability and willingness of the residents to stay and rebuild. Billions of dollars of property value are off of the tax rolls for years. If you can’t get insurance, then you can’t get a mortgage. And just like Florida, there will not be much that the government can do to make them change their minds.