Housing costs on either coast have hit a point where many are returning to the Midwest. The major problem driving this trend is increased insurance costs due to climate change.
Floods, wildfires, mudslides, and hurricanes have forced insurers like Allstate, State Farm, and Farmers to pull out of disaster ridden markets like South Florida altogether. The remaining insurers have increased their premium costs by 40% this year alone.
Insurance companies in those areas face a no-win situation. Current risk assessments put many providers in a position where only a fraction of their projected losses are being covered by premiums.
But the price increases of insurance are only the beginning. HOA fees in certain areas have tripled. And the fact that no one knows what a two by four will cost in the future, let alone whatever other costs might be needed to complete a repair, have sent many homeowners and investors packing for more affordable areas.
Many retirees are returning home to the Midwest.
I have several clients who own vacation rentals in Florida. One guy’s property was hit by hurricanes on three different occasions. On the occasion of the third storm, the town where the property was located rezoned the entire area and made it so that homeowners couldn’t rebuild even if they wanted to. It was a total loss.
Two others decided to cut their losses and sold off their properties altogether. Major vacation home developers in South Florida have followed suit by getting out.
Yet others who own vacation properties used to live off of the higher rents that came from tourists. Since many tourists are vacationing elsewhere, they’ve been forced to rent their properties at lower rates to year-round residents.
Southern California has not only many of these issues, but also housing costs that have skyrocketed. These problems, along with higher interest rates, are putting downward pressure on the price of homes on both coasts.
At the end of the day, a dollar only stretches so far.
Let me leave you with this.
We celebrate Halloween this Tuesday. The word Halloween is the conjunction of the words “All Hallows Eve”, which is the day before All Saints Day on the Christian Calendar. This is the day when we’re supposedly closest to all those who have gone on before us, hence the concept of Halloween.
I wonder if the people who began the practice of handing out candy to kids in scary costumes ever thought this holiday would become the economic generator it is today. This year, Americans are expected to spend $12.2B on candy, costumes, and other Halloween related items.
That’s billion with a B. The holiday is now bigger than even Thanksgiving and Easter.
Some of this is inflation. Candy costs have increased 16% from last year. Prices for cocoa, the main ingredient in chocolate, have risen 61% this year alone. Many are saying that this year, they’ll only give out one piece of candy to each kid that rings their doorbell.
That’s right, my Brothers and Sisters. Inflation may now affect how much chocolate your kids bring home on Wednesday.
More’s the pity.
We’re all going to get through this. Let’s get through it together.
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