11.11.2006 11:12 Real Estate
"There will be a whole new set of destinations because of the hurricanes and the rise in the cost of insurance," David Lereah said Friday at the NAR's convention in New Orleans. "People are going to think twice about wanting to live on the water."
A decade of severe hurricanes that have pounded Florida, the Gulf Coast, Louisiana, Texas and places up the Eastern coastline, has increased the price of homeowner policies and the difficulty in obtaining them, Lereah said.
"If we could sift out all the other problems (hurting home sales), the problem that will remain is the availability and affordability of insurance," he said. "Start in southern Florida and work your way up to Maine."
In Florida, which has had 12 hurricanes since 1995, the cost on insurance has risen "tenfold," Lereah said. It's causing some families to leave the state, he said, looking for protection from the storms and the insurance costs.
"We're talking people who lived there 20, 30 years," Lereah said. "A lot of them are moving to the Smoky Mountains."
The Realtors refer to them as "Halfbacks," Lereah said. "They originally moved from up north to Florida, now they're moving halfway back."
In California people are seeking safety in Washington and Oregon, Lereah said.
Louisiana, which was hit by Hurricanes Katrina and Rita in 2005, is currently having problems getting insurance for home buyers. Agents say prices have shot up from $1,000 annually to $3,000 or $4,000 annually, putting a damper on home sales.
"I think we need for the federal government to get involved and create some sort of backstop," Lereah said. "If you're a private insurance carrier you think twice about getting involved in an area where there is not a backstop."
The shift in politics with the Democrats taking control of both houses of Congress, should be good for both real estate agents and buyers, Lereah said. Democrats, he said, lean more toward assisting the home-owning sector than other sectors of the economy.
Although home sales have fallen, Lereah said only about a fourth of the country will be severely hit by the drop.
The drop is not tied to a poor economy, Lereah said. Instead it's cooled because of speculators dropping out, a lack of confidence in the home sales market, and a cutback on some of the more exotic forms of financing.
"There is a contraction because we had a boom that got carried away," he said.
Only markets that experienced unrealistic rises in values will be hit drastically now, however. "Seventy-four percent of the nation will be expanding still, in a sluggish way, but expanding nevertheless," he said.
Existing-home sales are expected to fall 8.6 percent this year, but be even in 2007, Lereah said. New home sales are likely to drop 16.8 percent this year, and another 8.7 percent in 2007.
Total housing starts this year will probably fall 10.6 percent to 1.85 million units, then decline another 11.8 percent to 1.63 million in 2007, he said.
"Given the huge gains in home values during the housing boom, and this year's rise in housing inventory, overall price gains this year and next will be modest," Lereah said.
