In the Know: After another torrid month of home sales, will higher insurance douse SWFL market's fire?
Phil Fernandez
Nothing seems to have slowed the rocket-powered real estate sector.
New data out this past week shows that January served as an extension of 2020 when it came to the sizzling home sales, top-dog numbers dude Mike Dodge told me.
"The 2021 Southwest Florida real estate market has picked up where last year left off. Buyer activity continues to be vigorous," said Dodge, whose real title is director of market research for John R. Wood Properties. "Sales have continued to maintain their feverish pace."
The Dodge Man did some extra digging for you and me and found that February final results also should show a continuation of the trend when at least Collier County stats eventually come out.
"Year-to-date through Feb. 23, closed sales in the Naples market were up 59.4% over the same period last year," Dodge said. "Overall months of supply was two months, clearly well into sellers’ market territory."
Well, with that tidbit, you've become my favorite Dodger on Earth, especially with the loss of dearly departed Dodger Tommy Lasorda in January. God's got a third base coach. What energy, that guy.
More:In the Know: 'Explosion of activity' led to $18.2 billion in 2020 Collier home sales record
Now, in light of the potential obstacles out there, including expected higher flood insurance rates and the changing dynamics tied to the vaccine, will this Teflon market maintain its vitality?
These days, the market sure acts a lot like a rope-a-doping Muhammed Ali taking punches. Can't knock it out despite landing a lot of heavy rights and lefts.
And they've come hard and fast, said Adam Ruud, managing broker of Domain Realty.
"For me, (2020) is just another reminder of how resilient our market can be. From the hurricanes we deal with. Irma, Wilma back in '05, the BP oil spill, the defective drywall, the red tide, the algae bloom, obviously throw in a global pandemic. We've definitely had our challenges over the years," Ruud said.
Yet, in the words of Gloria Estefan, "Here We Are" with Lee County's Royal Palm Coast Realtor Association and Bonita Springs-Estero Realtors Inc. also seeing continuing hot sales.
Vaccine and Alligator Alley pipeline
In this space, we first reported last year the possibility that the vaccine may not only slow the COVID-19 spread but also the exodus from big cities, crowds and tight spaces that drove buyers to Southwest Florida.
Recently, Rupert Murdoch's and the National Association of Realtors' realtor.com and others have taken notice, noting that New York City experienced nervous folks initially getting out of town after 9/11 only to see its population numbers climb back. This time around, transactions are already picking up there after a rough 2020.
With the vaccine quickly gaining needed traction under President Biden, economist Ali Wolf said not to count the big metros out of the housing game.
"The return to a non-socially distanced life brings with it the draw to be around other people again, especially as restaurants, bars, sporting events and concerts fully open," said Wolf, of real estate analytics company, Zonda.
However, for Southwest Florida in recent months, it's not just Empire State and Jersey license plates that have been popping up in more driveways, according to Budge Huskey, CEO of Premier Sotheby’s International Realty.
"This is true of Naples all the way up through Sarasota in tracking it — that we began to see this migration of people from Western states. We've always known we've had the traditional Midwesterners and the increasing number of people from the Northeast, but we were starting to see customers from Texas, from Arizona, from Alaska, Washington state, California, certainly to a level I've never witnessed before," Huskey said. This "uptick in buyers from more western states (is) a big change from our traditional Midwest buyers.”
And there's still no slowing of the Alligator Alley pipeline from the Miami region to our more affordable abodes on calmer sands.
"The migration from the east coast of Florida was really something we (have) not seen at this level before," Huskey said.
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And it's not that they're resigning from their current out-of-town jobs when they buy, said Mike Hughes, vice-president of Downing-Frye Realty Inc.
"Unlike other buyers, they didn’t end up working remotely. They just became commuters. That surprised me a little bit," Hughes said. "A lot of them said, 'You know what, when you live on the East Coast, you're bogged down in that rush hour traffic.'"
For example, Ave Maria is 82 miles from Weston on Broward County's eastern edge, and I'm sure you've noticed how autos boogie on that apparent Autobahn slab of I-75. You're a tortoise at 80 mph. And new developments rising in South Naples are as close as about 90 minutes following the speed limit to Miccosukee Resort & Gaming, just down the road on U.S. 41. Plus, yes, authentic Café Cubano just beyond that.
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Rising flood insurance
These folks are also moving away from where the rising tides effect of global warming has received extensive attention.
Last week, I reported on new findings showing that's going to be an issue for many of us on this coast as well, and only going to get worse in the coming years, according to the First Street Foundation.
And it'll also be noticeable in flood insurance bills tied to Federal Emergency Management Agency's October implementation of Risk Rating 2.0, the biggest change ever in how the National Flood Insurance Program calculates premiums.
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There's no agreement, but there's concern significantly higher rates could put a headbutt into home sales.
FEMA, which has been developing this new concept well before 2021, is trying to put more responsibility on those choosing to live in flood zones even with worsening climate change.
The idea is to make sure folks who face the greatest threat pay more of a fair share, which hasn't been the case in the past, when those in less jeopardy and taxpayers often got stuck with too much of the bill, said Matthew Eby, First Street’s founder and executive director.
To accomplish that, premiums should be a lot closer to your home's average annual expected loss, which for the first time you can find on firststreet.org.
Raising those rates to that loss level would go a long way toward better covering flood damage and saving taxpayers hundreds of billions in dollars in Florida alone over the next 30 years, Eby said.
The gap in the worst case scenarios is up to 5,000%, which Cape Coral reader JD Kidd aptly described in one of my many back and forths in sorting through this math with residents and experts as "terrifying." But FEMA holds most rate hikes to a maximum of 18% a year.
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Shhh ... Some insider info
Chris Heidrick, founder of Sanibel's Heidrick & Co., has more inside knowledge on this particular subject than most people on the continent. He's chair of the Flood Insurance Sub-committee for the Independent Insurance Agents and Brokers of America.
"I have worked closely with FEMA over the past year on Risk Rating 2.0 and have not heard or seen anything that would be cause for alarm. While I am under an NDA (non-disclosure agreement) and not able to share specific details," Heidrick said it would be incorrect for locals to be "thinking they could receive a 5,000% increase anytime soon."
But pay attention, newbie, and even some veteran homebuyers. If there's something to cram into your cerebrum from this column, it's this from Heidrick:
"Federal law currently allows a policyholder to 'assign' a flood policy to a new buyer of the home. This would protect the current owner against a sudden impact to market value by allowing the new buyer to continue on the seller’s glidepath to the actuarially correct premium," said Heidrick, who expects FEMA to release rates in the summer. "There is nothing in Risk Rating 2.0 that will cause rates to immediately skyrocket."
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That type of sentiment is shared by Phil Wood, who has more than 40 years in the realty business and is president of John R. Wood Properties that's coming off a 2020 with written sales volume of $3.65 billion, a billion more than 2019.
"The federal government has been raising rates gradually for a number of years. They have tried a couple of times to have a drastic increase, and there was a lot of resistance to do anything too fast. So I think that future increases will continue to be relatively moderate," Wood said. "It is common to see some of the higher price range homes, such as multi-million dollar beachfront homes, self insure.
"When a business self insures, it generally means that they put some money aside for the possibility of future payouts. However, the wealthy homeowners typically don’t do it that way. They just know that if their $30 million home has some flooding damage, they can afford to spend a couple of million to take care of the repairs."
Heidrick agrees that "owners of the most risky properties are likely aware of the risk and will choose to self-insure if the premium is high."
And if a purchaser is unhappy with what FEMA's offering, private flood insurance is becoming a growing option, said real estate agent Dennis Bowers, who leads at The Bowers Group at Compass in Naples.
Another advantage Southwest Florida has is buyers are coming from places where the cost of living is often more expensive. Flood insurance wouldn't seem to be as much of a burden when weighing other savings, Bowers said.
"So many people are moving from higher tax areas and are going to save here, and most know that you will have to pay more in insurance," Bowers said. "I don't feel that this will impact home sales in an adverse way."
Something else also has been happening that's in play.
"Minimum elevation levels have continued to increase for many years. Many people don’t realize that these laws strongly encourage buyers to take older, lower level homes and tear them down, instead of renovating," said Wood, whose firm recently merged with Vineyards Naples Properties. "The result is that we continually have an increasing number of homes at higher elevations, thus making them less susceptible to potential flood damage."
Based at the Naples Daily News, Columnist Phil Fernandez (pfernandez@gannett.com) writes In the Know as part of the USA TODAY NETWORK. Support Democracy and subscribe to a newspaper.