Returning snowbirds may consider renting instead of buying in Florida
A look at the overlapping, amplifying risks to Florida real estate
It's the peak of snowbird season, when plummeting temperatures in the North and the end of Christmas holidays mark the migration of about 1.5 million seasonal residents to Florida, substantially boosting Florida's retiree population. Some of these arrivals, many retirees, may be dreaming of shifting their primary residence. Florida is already a low-tax state, with no income tax or estate tax and low sales, income, and property taxes. Last November, the tax picture got even rosier: voters approved tying the property tax homestead exemption (which reduces the assessed value of a primary residence by $50,000) to the national inflation rate—meaning that if the Consumer Price Index goes up by two percent this year, the amount of the exemption will do the same. A peaceful, balmy stay plus protected income tends to spark the imagination, making visitors project themselves into homeownership.
In light of significant climate-related effects the state experienced during 2024, this year will be telling. A confluence of facts and forces may change the minds of retirees who in years past would have been snapping up inventory, and this may speed the erosion of property values in several Florida markets. At the same time, Florida's low-tax environment will make it ever more difficult for local governments to make needed investments to change where and how its residents live. It's a vicious cycle that will likely play out in several low-tax Southeastern states over the next couple of years. But Florida, with its insistence that everything is Just Fine, is the narrative gift that keeps on giving.
The news is both climactic and economic.This past fall, Hurricane Helene triggered storm surges as high as 15 feet, leading to widespread destruction along Florida’s Gulf Coast. Just two weeks later, Hurricane Milton hit, causing dozens of tornadoes and extensive flooding in the Sunshine State. Florida is already seeing the effects of extreme heat, intensifying precipitation, increased flooding risk, groundwater rise, sea level rise, salt water intrusion, all combined with explosive population growth.
According to Zac Taylor, writing for The Tampa Bay Times, home insurance premiums in Florida have risen more than 100% over the last three years. Florida has the highest enrollment in its state insurer of last resort, Citizens, of any state. While the number of Citizens policyholders recently dropped below 1 million for the first time in more than two years, this deliberate "depopulation" effort has likely pushed more homeowners into signing up either with "non-admitted" insurers, who are freer from oversight by the state government, or with other geographically concentrated, less-solvent insurers who are offering ever-thinner coverage.* As Francois Ramette of PwC puts it, "Smaller insurers are particularly at risk of outsized losses given their inherently more concentrated (less diversified) books of business and lower levels of analytical capability."
Depopulation "offers" feel mandatory to the policyholders, who cease to be eligible for Citizens coverage if the new private offered premium is no more than 20 percent more expensive than what Citizens was charging. That differential may hold for Year 1, but after that the private insurer may hike rates—which will be difficult for retirees on low, fixed incomes. So people looking for home insurance in Florida will end up with thinner, more expensive coverage that has them shouldering more uncertainty and higher out-of-pocket expenses, if they can find it at all. Five counties in Florida (Collier, Indian River, Charlotte, Brevard, Polk, and Miami-Dade) are in the top twenty counties nationwide for non-renewals.
Back to our prospective homeowner visiting Florida this winter. They will be hearing about the insurance crisis, surely. That crisis has consequences: As the Senate Budget Committee put it in its recent report, "In certain communities, sky-high insurance premiums and unavailable coverage will make it nearly impossible for anyone who cannot buy a house in cash to get a mortgage and buy a home." So it's not just insurance availability these buyers will be looking at. They'll need to worry about the asset value, the utility value, of any home they buy.
That value is softening in several Florida markets. In particular, Charlotte County (Punta Gorda) Florida is seeing property values decline and properties are sitting on the market for a long time. There's too much supply in the pipeline. It's also one of the most vulnerable counties in the country when it comes to foreclosure actions—and it's at great physical risk from climate change. The combination of insurance risk and falling property values will surely cause some buyers in some Florida locations to pause.
Here's another long-term risk they might want to put on the table: That new inflation-tied homestead tax exemption will cost Florida local governments more than $400 million in the first five years alone. That means less money to fix and improve infrastructure and fewer resources to plan ahead for the physical effects of climate change. This shortfall is part of a larger picture: New York State spends more than twice what Florida does on each resident, and per-capita income and GDP in New York are far higher than in Florida. All those low taxes may mean lower levels of services (although the empirical data is all over the map in this area).
The basic point these retirees may want to consider when looking at particular Florida housing markets is: Am I buying a house that I or my beneficiaries will be able to sell? Will it hold its value? Will the community it's in remain attractive?
Renting might be a better idea in many places. You can still dream in a rental.
*The slimmed-down Citizens still faces material risk that, if triggered, would quickly drive it into insolvency: According to the "probable maximum loss" scenarios described in its 2025 budget, a one-in-100-year storm would completely wipe out its projected surplus for the year (the profit cushion available to pay claims), and a one-in-25-year storm could cause a net $2 billion loss for the third time in four years. In general, across the country, insured losses from U.S. storms have grown 8 percent a year recently, according to Swiss Re and The Wall Street Journal. These losses are felt intensely in Florida, which has experienced 24 billion-dollar disasters over the last five years.