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I know a few people who are trying to move to north Florida in fear that their home will become worthless in the near future, in the Miami metro area. Streets are flooding more often. I even heard of an art gallery in Fort Lauderdale that fills up with water every year now inside.
So then why do banks continue to lend money to home buyers in south Florida if the risk of rising sea level is so high, eventually causing properties to become worthless??
Will this actually happen? Will South Florida still be livable in say, 2050? How big of a concern is this??
In the long run we are all dead. Is that a big concern? Not really.
Life is a series of short-run movements and risk. Really.
Moreover, in the Information Age, money grows on electrons, the banking system diversifies risk, and the Federal Reserve System/Treasury Department would bail them out.
I would instead keep closer observance on insurance trends as a more meaningful measure of risk, year-to-year.
Personally I am content to live here, and plan on continuing to live here in the long run (dead); at the same time I do not invest all my assets in real estate here.
I am sure that people and groups of people, with orders of magnitude of greater assets than I have title to, implement a similar approach on grander scales.
For example, it is not uncommon to read about a private company executive or high government official or elite athlete or elite entertainer buying houses and condos priced at $25 million, give or take, in southern Florida, right on the coast; one could reasonably assume that such dollar figures are a relatively small fraction of their overall wealth or, if not, they are poorly advised.
Now for those who view their main dwelling as also their main asset, and whose expenses also soak up the largest portion of their income, then it is reasonable that they may seek to flee high annual insurance and other building expenses and maintenance costs, a significant portion of which are associated with high volumes of sometimes volatile and deadly wind and water.
That's what I'd like to know. It's ironic the kind of people who live these areas vote for the party that are most concerned about this as well. If everything is doomed to be underwater soon then these properties should be worthless. Strange.
If sea level really occurred, it'd be difficult to pump out the water due to the porous bottom.
WRnative had a good explanation- as long as banks can make a profit by reselling their Florida loans after closing, they'll keep writing mortgages here, and by doing a lot to socialize the risks of property insurance, which enables the easy resale of mortgage debt, the state has pushed that point out for a decent amount of time.
I see that system being propped up for a long time because the demand for mild winter weather properties will continue to make it cost-effective to maintain the status quo. And there are many steps that state/local government can take to counter modest sea level changes.
There will be a tipping point a couple decades down the line, but I see the next 20-25 years as pretty stable from a sea level standpoint, though we seem to be in the active part of the hurricane cycle, and the reinsurance market during an active cyclone period remains the wild card in it all.
I know a few people who are trying to move to north Florida in fear that their home will become worthless in the near future, in the Miami metro area. Streets are flooding more often. I even heard of an art gallery in Fort Lauderdale that fills up with water every year now inside.
So then why do banks continue to lend money to home buyers in south Florida if the risk of rising sea level is so high, eventually causing properties to become worthless??
Will this actually happen? Will South Florida still be liveable in say, 2050? How big of a concern is this??
Mortgages cap at 30 year terms. Anyone getting a loan today, will have paid the loan off 20 years before their property is underwater.
Banks have nothing to lose, and plenty of time to profit before they have to even think about it.
And - at some point, the Everglades will become the new Miami. So they'll be profiting all over again there.
....on a side note, California was supposed to be in the ocean by now after “The Big One” hit—still waiting on that.
That was always a silly myth. No matter how big of an earthquake happens, California isn't going to fall into the ocean. The tectonic plates don't work that way; they are moving parallel to each other, not up and down.
The really rich people in California don't build at sea level, they build up on the cliffs facing the ocean. Of course that has its own problems, and is not really an option in Florida...
I know a few people who are trying to move to north Florida in fear that their home will become worthless in the near future, in the Miami metro area. Streets are flooding more often. I even heard of an art gallery in Fort Lauderdale that fills up with water every year now inside.
So then why do banks continue to lend money to home buyers in south Florida if the risk of rising sea level is so high, eventually causing properties to become worthless??
Will this actually happen? Will South Florida still be liveable in say, 2050? How big of a concern is this??
1. Banks earn money lending money. Banks then sell those loans to investor groups.
2. Mortgages rarely get paid off in 30 years. More likely it gets refinanced or the property gets sold way before the maturity date on today's mortgage.
3. Despite what you feel or the dopey people told you about flooding/moving to avoid it, the fact is SE Florida is extremely desirable and people want to live there.
Bigger question for you: How many people living in SE Florida won't be alive in 30 years? They will have died and the real estate isn't their problem anymore!
That being said..........I'd buy smart, buy stuff with decent elevation vs. low streets/seawalls to prolong the effects.
I'd also lean towards an older home, skip the insurance and look at it as a place to live for free. When something catastrophic happens I'll rebuilt it with flooding precautions. Think about it, if the insurance is 30-40K a year plus the crazy deductible, you could be ahead 300-400K after 10 years PLUS the deductible before the insurance company even writes a $1 check.
True, but NOT because banks don't think there is risk resulting from accelerating sea level rise to many properties for which they provide financing. Banks rely on the fact that they can pocket the fees for writing these mortgages then dump the future liabilities on Freddie Mac and Fannie Mae, with any eventual losses suffered by the nation as a whole.
<<A recent paper published by the National Bureau of Economic Research described how banks are shifting riskier mortgages—such as those in coastal areas—off their books and over to Fannie Mae and Freddie Mac. Fannie and Freddie are by regulation prohibited from considering climate risk in their pricing.>>
Reading through the above and other similar articles, the risks to coastal property owners, coastal communities, and to all Floridians extend well beyond just the properties at immediate risk. With every passing year, investors will become more reluctant to underwrite the Florida economy. From the above article:
<<What’s more, the fate of Florida’s citizens, homes, towns, businesses and overall economy depend on decisions being made right now on 30-year mortgages and bonds that will be critically impaired by that 2050 high-tide line....
Once investors and insurers decide that the value of too many 30-year mortgages face an unacceptable level of risk, many mortgages (including yours?) will go underwater or even be thrown into default. Even worse for the rest of Florida, financing for new long-term mortgages, utility debt offerings, and municipal bonds for schools, roads, bridges, sewers, etc., will dry up. That in turn will deflate real estate values overall and crush the backbone of the Florida economy—and send Florida into a deep and costly tailspin.
It could happen next month, next year or a few more years out; but—on our present course—it is sure to happen much sooner than 2050. >>
Repeated threads in this forum have explained how a collapse in affordable insurance is the likely catalyst for an imposition of the reality of climate change on the Florida economy. From the above article:
<<A worst-case scenario was bracingly laid out by Spencer Glendon at the recent Sohn Investment Conference and in related interviews, such as here.
Glendon points out that Florida’s mortgage debt is underwritten by annual insurance. So, while mortgage and bond holders accept 30-year terms, hazard insurers make only one-year commitments. As losses mount or insurers get more sophisticated at estimating potential losses, insurance will get more and more expensive. If current behavior continues, Glendon predicts that “insurance markets will dry up” long before Florida is under water.>>
A major hurricane striking a heavily populated metropolitan area may be the catalyst for Florida's economic reckoning. Or it may be re-rating of FEMA flood insurance premiums, or increasing recognition of accelerating sea level rise as the next few decades unfold.
In the past month, the threat of warming oceans off Florida due to a slowing Gulf Stream has again gained the attention of scientists. Warmer oceans will result in greater thermal expansion, more rapid hurricane intensification, warmer atmospheric temperatures, higher levels of humidity and greater rainfall.
Do you really not understand the difference between an opinion piece and a hard news article? Your citations clearly represent the alarmist opinions of the writer and are devoid of supporting facts. "Worst case scenarios" are just that and then writers who choose to focus on these often take them a step or two farther and make more unfounded predictions as seen in the article you cite.
Get back to us when residential mortgages are no longer available in the subject area.
Do you really not understand the difference between an opinion piece and a hard news article? Your citations clearly represent the alarmist opinions of the writer and are devoid of supporting facts. "Worst case scenarios" are just that and then writers who choose to focus on these often take them a step or two farther and make more unfounded predictions as seen in the article you cite.
Get back to us when residential mortgages are no longer available in the subject area.
I get it. There are some individuals who won't acknowledge the reality of climate change despite empirical evidence ascertaining rapidly rising ocean heat content, rapid intensification of hurricanes, accelerating ice melt in the cryosphere, accelerating sea level rise, more frequent and massive wild fires globally including in boreal regions, a slowing Gulf Stream and the ocean circulatory system in general, permafrost thaw releasing massive amounts of methane and carbon dioxide, increased sunny day flooding in low-sea level regions in Florida and elsewhere, rising atmospheric heat levels, increasing drought conditions, etc.
So anyone who makes reasonable projections based on scientific analysis are "alarmist." Just because projections are alarmist doesn't mean they are false. Scientists such as Harold Wanless who postpone their retirements in order to sound the alarm should not be discredited for their efforts. Yes, Wanless is being alarmist when, as explained in post 6, he notes that there is a significant correlation between global carbon dioxide levels and ocean sea levels. Now, the issue is whether he is right or wrong. His observation is nothing new and I've never seen it disputed, so IMO Wanless is doing a service by bringing it the attention of the public. Surely you don't advocate that Floridians should live in scientific ignorance???
As noted also in post 6, regional scientific climate change panels are projecting significant increases in sea level rise in the coming decade (as much as a foot or more by 2030) and in subsequent decades, again not disputing Wanless' warnings.
The issue immediately may not be mortgage availability, especially as long as Freddie Mac and Fannie Mae accept risky coastal mortgages and don't even charge a cost penalty. The issue may be affordability, compounded by increasing wind insurance premiums.
While Fannie Mae and Freddie Mac will accept mortgages, they require flood insurance.
FEMA flood insurance is heavily subsidized, especially for more risky flood zone areas. At some point, premiums are expected to rise significantly. These increased premiums will be passed along to owners through escrow account charges.
<<Typically, “the maximum amount of coverage available through the NFIP for a residential home is $250,000,” says Drew Scott, vice president of Personal Lines at Stratford, Connecticut-based Scott Insurance.
Zeornes says the NFIP “pays replacement cost loss settlement on primary dwellings insured to 80 percent of the replacement cost or at the maximum limits. Otherwise, all building and contents loss settlement guidelines pay actual cash value.”>>
Wind insurance is more problematic as insurers may raise prices more substantially or even stop offering, especially if their capital reserves suffer large reductions due to a powerful hurricane striking a major population center.
Climate change economic and investment expert Spencer Glendon explains the risk here:
<<Insurability is the main issue. Thirty-year mortgages come with the condition that a borrower have insurance, which is renewed annually. But insurers can choose to stop offering insurance at any time, or make prices prohibitively expensive, which would cause a homeowner to violate their debt. Eventually, lenders would be forced to stop lending, causing prices to plummet.
In Florida, where many parts of the state are increasingly under risk of flooding and infrastructure erosion, both insurance companies and reinsurance companies have begun to sound the alarm and suggest they will not be working in Florida markets in the coming years.
“Things that are a 1 in 20 year event, or a 5 percent risk, are essentially uninsurable in most parts of world. That’s too often for an insurance company to want to intervene and have to want to deal with claims,” he said. “In most of coastal Florida, that threshold has already been breached.”>>
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