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69 comments on DrumBeat: January 1, 2007

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HeIsSoFly on January 1, 2007 - 10:35am Permalink | Subthread | Parent | Comments top

If you can't get insurance, you can't get a mortgage.

If you can't get a mortgage, you won't buy the house.

This is what you call large scale capital destruction. The owners have insurance, but can't sell anymore. Plus, their premiums go up bigtime. Not a nice position to be in.

Think it's bad now? Wait till after the next big storm.

Sea Change In Insurers' Coastal Coverage

Many Firms Opt to End Or Limit New Policies

Major insurance companies are throwing cold water on America's new passion for living near the ocean and by the bay.

Recently, the biggest companies in the homeowners insurance business announced that they will stop writing new policies in some coastal areas of the mid-Atlantic and will otherwise limit coverage there. They have already reduced their coverage in states more prone to hurricanes.

Some real estate agents say they expect the situation will make it harder to sell second homes and investment properties on the waterfront. "We've already been experiencing problems since last year getting insurance for second-home buyers and the investment class, because many times the properties are more than five miles from the firehouse and there aren't any fire hydrants around, although they could just throw a hose in the pool or in the river," said Schuyler Benson, an owner of Benson & Mangold Real Estate, a brokerage on Maryland's Eastern Shore.

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Leanan on January 1, 2007 - 11:08am Permalink | Subthread | Parent | Comments top

A "managed retreat from the coasts" is what we should be doing. If the free market prevailed, the retreat would happen, though "managed" is probably not how it would go down.

The free market isn't prevailing, of course. Unfortunately, the government is really screwing it up. In Florida, the state - IOW, the taxpayers - is insuring homes that insurance companies won't.

In North Carolina, Hurricane Fran decimated some towns in areas that weren't supposed to be rebuilt with federal money. They were supposed to pay people to relocate, but not to rebuild. But emotions ran so high after the disaster that they got a waiver. The result was a huge jump in prices. Houses that used to cost 1 million started going for 2 million. And more people moved into harm's way.

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HeIsSoFly on January 1, 2007 - 11:42am Permalink | Subthread | Parent | Comments top

The free market isn't prevailing, of course. Unfortunately, the government is really screwing it up.

A predictable development. Governments have votes as their no.1 priority. They must see the sign on the wall, but if that is more further out into the future than the next election, guess what?

Politicians can afford to wait for insurers to act first, and they in turn proceed with caution, since they need clients. Moderately higher premiums, more money down, the kind of thing that rolls out of computer models.

Still, it just that next big storm, and everything will change.

By the way, isn't it hilarious somehow that a bunch of Germans, as in Munich RE, and Swiss, in Zurich RE, cast the decisive vote on the value of large parts of US real estate?

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69 comments on DrumBeat: January 1, 2007

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