The Real Estate Market After the Storm

In the short three weeks since Hurricane Irma visited the Florida Keys, life is already beginning to return to "normal" for many in the area. Stores are open, schools are back in session, and the cleanup crews are working tirelessly to clean up our island home.

But what effect will the storm have on the real estate market?

Some believe the images of high winds, ocean surge and damage to homes, boats and landscaping being broadcast on television and social media sites may make buyers hesitant to purchase in a hurricane prone area. When looking at these images, it is important to remember that those are the images the media want you to see. They want you to see damage. They want you to see distraught people. What they don't show are the many areas of the Keys that are still fine. They won't show the undamaged homes or the relieved locals that suffered little damage because those images don't sell newspapers or news magazines. 

Costs to purchase, such as insurance, may have a factor in how the market does. Insurance costs may rise, which will add to the cost of owning a home here. Most condominiums will have special assessments to cover costs of cleaning up common areas within the complex. 

There are also plenty of people who are rethinking the decision to live in the Keys, and these people may be putting homes on the market in an effort to leave the area. Reasons people are considering leaving are the already high costs of living here, which are bound to become higher and the uncertainty of when the next storm will come.  

Still, there are buyers that were under contract to close prior to the storm and many of those buyers are still going to close on the property, particularly in areas that were not hit as hard as others, such as the Upper Keys. 

What I've been seeing in the MLS is a lot of properties are being taken off the market, either temporarily or permanently. I expect many of them will come back on the market after repairs have been made and landscaping is back in place.  What I'm not seeing is a lot of new listings coming on the market.

I believe Irma  created a fresh awareness of hurricane protection. Such as the desire to have impact windows, hip roofs, better drainage, the age of the roof ect. Also higher risk factors will be noticed more and we may lose some buyers with higher wind risk. We may also see an avoidance of wood frame homes due to the fear of them being weaker in storms, accurate or not fear is a strong factor. Many of the old majestic homes in Key West are wood frame and have weathered many storms and are still standing strong. 

The fact is, people love to come here for the weather (most of the time), the fish and the diving.   The desirability of that will not decrease.  And my personal opinion is that the Florida Keys will remain more attractive even though hurricanes will still pass through from time to time. 

How Do Hurricane Deductibles Work?

I'd like to thank Tracie Sihle of Sihle Insurance Group for this information about hurricane deductibles. Many homeowners across South Florida will be making claims post-Irma.

Most homeowners policies have an “all other peril” (AOP) deductible for losses caused by perils such as vandalism, fire, lightening, and theft and a separate deductible for hurricane losses.

The hurricane deductible is mandated by Florida statutes.

The hurricane deductible is expressed as a percentage, typically 2-5%, but higher percentages are available. It is a percentage of the coverage amount, not a percentage of the loss.

For an example, a structure insured for $200,000 with a two percent deductible would have a deductible of $4,000 for damage caused by a hurricane.

The hurricane deductible applies only for a hurricane as defined in the statutes. According to Florida Statute 627.4025, a hurricane means a storm system that has been declared a “hurricane” by the National Hurricane Center or the National Weather Service. Note that a named tropical storm does not trigger the hurricane deductible.

According to the statutes, the duration of a hurricane in which the hurricane deductible would apply includes the time period:

• Beginning at the time a hurricane watch or warning is issued for any part of Florida by the National Hurricane Center.
• Continuing for the time period during which the hurricane conditions exist anywhere in Florida; and
• Ending 72 hours following the termination of the last hurricane watch or hurricane warning issued

The deductible applies on a calendar year basis.  Using the earlier example of the $4,000 hurricane deductible, that $4,000 applies for all losses during the calendar year for losses due to hurricanes. For example, in 2004 some areas of Florida were hit by three major hurricanes in about 40 days. This calendar year deductible applies only if the customer was insured by the same company during all hurricanes. Assume that a hurricane causes $40,000 in damage; the claim is paid less the $4,000 deductible. If there is a second hurricane during the calendar year, the $4,000 hurricane deductible does not apply; instead the AOP (all other perils) deductible applies.

In a different example, suppose that the first hurricane causes damage of only $3,000. Due to the $4,000 deductible, nothing is paid by the carrier and you pay $3,000 of the deductible. If a second hurricane were to cause $35,000 in damage the claim is paid less a $1,000 deductible ($4,000 hurricane deductible less the $3,000 that applied for the first hurricane, leaving $1,000 deductible). If a third hurricane were to cause damage in the same calendar year, the AOP deductible would apply.

Many, if not most, insurance policies require that the customer report all hurricane losses, even those that are clearly below the deductible.

Policies are different; it’s key to read the specific policy in question to see how deductibles are structured. 

For example, non-admitted insurance carriers will not comply the same as admitted carriers with some of the state’s regulations regarding hurricane deductibles.

Hurricane deductibles on policies typically can only be changed at the renewal date of the policy.

For questions and more information, please contact Traci Sihle:

Main Office: 407.869.0962 x1206| www.Sihle.com

Email: Tsihle@sihle.com 1021 Douglas Ave, Altamonte Springs, FL 32714 O:321.422.7825 C:407.421.0424F:407.389.8454