Throughout much of the COVID-19 pandemic, Florida’s housing market was booming. The Property Advocates points out that home prices throughout the state increased 58% from the pandemic’s start in March 2020 through September of this year, according to data from TD Economics.
That being said, the state’s housing market began its downturn at the start of 2022, with TD Economics reporting year-to-date sales dropping 25% and price growth dropping as well.
Still, Florida’s housing bubble hadn’t burst yet. That is until Hurricane Ian made landfall toward the end of September.
Did the massively damaging storm officially put an end to Florida’s housing boom? Many signs are saying that it did.
Record Number of Insurance Claims
Hurricane Ian is projected to be the most expensive storm to affect Florida in terms of the amount of insurance damage that will be paid out. Already, $207 million has been dispersed to claims. Now, many experts believe the insurance industry in the state may be on the brink of collapse.
It wasn’t an issue that started with Hurricane Ian, but rather started 30 years ago when Hurricane Andrew hit in August 1992. Following the storm, some insurance companies in the state went bankrupt, and others pulled out of Florida altogether because they deemed it to be too risky.
What started 30 years ago is now having a real trickle-down effect on Florida’s housing market, as Hurricane Ian dealt the industry another massive blow.
Insurance’s Tie to the Housing Market
Florida law does not require homeowners to carry insurance on their property. However, homeowners who carry a mortgage on their home are usually required by their lender to purchase insurance. Even those people who have paid off their homes in full typically carry insurance on their property in Florida since it’s likely their biggest asset and because the state sustains damage from storms relatively often.
The insurance industry, as a result, has a direct tie-in with the housing market in Florida. If more insurance companies go bankrupt or pull out of the state following Hurricane Ian, premiums could significantly increase as options decrease.
With so much risk in the state, Florida insurance companies are often forced to get reinsurance, which is insurance for insurance companies. This practice occurs throughout the country but is common in Florida as a way to keep claims more affordable.
If these reinsurance companies pull out of Florida, though, things could get even worse. There’s evidence that these companies are considering pulling out of Florida, as they’ve recently reduced their coverage by about half to Florida insurers.
If this happens, Florida homeowners could be forced to rely more on public insurance, which could be expensive and provide significantly less coverage than they’re used to.
What Happens Next?
The Property Advocates explains that as there are signs that the insurance industry is collapsing in Florida, the state’s housing boom is starting to burst.
With insurers and reinsurers pulling out of Florida, taxes in the state will likely rise. In addition, this could result in it becoming harder for people to get adequate homeowners insurance that would cover them in the event of damage.
Ultimately, this could lead to fewer people being interested in owning a home and current homeowners selling in favor of renting — or leaving the state altogether. This could lead to fewer new homes being built, dealing losses to the construction industry. As all of this happens, property taxes increase, and tourism drops.
It’s why the insurance industry is vital in the continued health of the Florida real estate market and why Hurricane Ian likely dealt a massive blow to the state’s housing bubble.
About The Property Advocates
The Property Advocates, P.A. is a full-service Florida insurance law firm specializing in property insurance claims. With offices in Miami, Orlando, and Tampa, The Property Advocates team consists of nearly 25 experienced attorneys with decades of combined experience who are compassionate, knowledgeable, and not afraid to go to trial for their clients. They have a successful track record of resolving complicated property insurance claims and getting their clients the fair compensation they deserve.
