Four and a half years ago I spent a couple of weeks in South Florida on the east coast traveling from Jupiter to Palm Beach, Fort Lauderdale and on to South Beach. Real estate investment was booming in 2004. Beach front condos and single family homes just ten minutes or so from the ocean were affordable compared to housing prices in the Northeast, and earning owners double digit returns year over year.
As strong of an investment Florida real estate was during this time, its volatility became increasingly apparent. Not long after my vacation ended, Hurricanes Frances and Jeanne ripped through South Florida. With Hurricane Wilma in 2005, these three made the list of the eleven worst hurricanes in South Florida history, according to the Sun-Sentinal.com.
With an increase in violent hurricane activity and predictions from hurricane experts that Florida would remain in a high hurricane activity pattern in the coming years, home owner's insurance premiums rose dramatically and many insurance companies pulled out of Florida completely. The combination of high insurance premiums, bleak hurricane predictions, salaries lower than the national average, and an increasing surplus of property due to over development, Florida began to experience a rapid decline in property values.
Presently, Florida hasn't been hit by anywhere near the number of storms predicted, yet according to a recent article on MiamiHerald.com, Florida law makers are confronting the state's insurance woes as it tries to shift some of the burden it took on in 2007 when the catastrophe fund it set up was expanded. According to the article, the proposed bill would create a statewide windstorm program, giving insurers the option of selling policies with hurricane coverage or letting the state take it all on. The downside is that if insurers can't buy the cheaper back-up insurance from the state, they would have to buy in the private market at possibly higher rates.
One thing is for sure, people are still going to find a way to live in Florida. Check out domeofahome.com and read Marc Rasmussen's blog. Marc highlights a new building style that is not only built to withstand 200mph winds, but offers greater energy efficiencies and conveniences not found in traditional Florida home styles. Could domes be the future home design that solves the state's insurance woes? Likely not completely, but it's a step in the right direction.