The Nightmare Scenario for Florida’s Coastal Homeowners

Demand and financing could collapse before the sea consumes a single house.

.. “These boats are going to be the canary in the mine,” said Cason, who became mayor in 2011 after retiring from the U.S. foreign service. “When the boats can’t go out, the property values go down.”

.. Relative sea levels in South Florida are roughly four inches higher now than in 1992. The National Oceanic and Atmospheric Administration predicts sea levels will rise as much as three feet in Miami by 2060. By the end of the century, according to projections by Zillow, some 934,000 existing Florida properties, worth more than $400 billion, are at risk of being submerged.

.. Saltwater is creeping into the drinking water supply. The area’s drainage canals rely on gravity; as oceans rise, the water utility has had to install giant pumps to push water out to the ocean.

.. Sean Becketti, the chief economist at Freddie Mac, warned in a report last year of a housing crisis for coastal areas more severe than the Great Recession, one that could spread through banks, insurers and other industries.

.. Citing Florida as a chief example, he wondered if values would decline gradually or precipitously. Will the catalyst be a bank refusing to issue a mortgage? Will it be an insurer refusing to issue a policy? Or, he asked, “Will the trigger be one or two homeowners who decide to sell defensively?”

.. He described South Florida’s real estate market as “pessimists selling to optimists,” and said he wanted to cash out while the latter still outnumbered the former.

.. Since the end of 2010, median home prices in and around Miami rose 120 percent, almost twice the statewide average and three times the national rate. In January, a building in Palm Beach County called The Bristol topped $300 million in units sold, achieving the distinction of the most-expensive condominium in that county’s history

.. Realtors in Florida face no legal requirement to warn potential buyers about those flood risks. Albert Slap, president of Coastal Risk Consulting, which helps homeowners and governments measure their exposure to flooding, said he thinks that will soon change: Just as the public demanded mandatory disclosure of asbestos and lead paint, people will insist on the same disclosure if a house suffers regular floods.

And when that happens, Slap said, many Florida home prices will tumble.

.. “Anybody in these floody areas, if they disclose to a buyer, the buyer probably won’t buy that property,” said Slap, whose company is doing work for the city of Miami Beach. “That’s going to drive the value down to zero, well before water is up to their front door.”

.. “The next black swan is the failure of housing finance to take climate change into account,” he said. “There will be a large number of homes that will lose substantial value, and will default on mortgages, if nothing is done to help them.”

.. : The government simply won’t be able rescue homeowners who wait too long to sell. “There isn’t enough money,” he said.

.. The National Flood Insurance Program is up for reauthorization this year; fiscal conservatives have said they want to use that opportunity to reduce the program’s subsidies, so that people are paying something closer to the full cost of their risk.
A cut in federal subsidies would particularly hurt Florida, which despite its exposure pays the lowest average flood-insurance premiums in the country, according to FEMA data.