With not-so-distant memories of back-to-back-to-back violent storms still lingering in the minds of homeowners, insurers and brokers, the beginning of hurricane season is about as welcome as the busted real estate bubble.
Indeed, meteorologists are forecasting what could be a record year for hurricanes at worst; a worse-than-usual season at best. There’s a 65 percent chance of a busier-than-average hurricane season this year, according to the National Oceanographic and Atmospheric Administration (NOAA). NOAA predicted 12 to 16 named storms between June 1 and November 30. Closer to home, the Atlantic Coast can expect up to nine hurricanes in 2008.
The multimillion-dollar question is this: How will it impact local real estate sales? Will fearful media headlines recalling the billions of dollars of damage to Florida properties in 2004 and 2005 scare off buyers? Could the wave of international investment that has helped buoy the sales in Dade, Broward and Pam Beach counties slow until the wintertime? That depends on whom you ask.
Jonathan Z. Kurry, partner in the Miami office of Stroock and Stroock and Lavan LLP, says hurricane predictions don’t have much impact on South Florida real estate markets, unless a storm is imminent.
“Although expensive windstorm insurance has to be factored in as a significant cost of ownership, it rarely becomes a determining factor when deciding whether to acquire an asset,” Kurry argues. “Institutional buyers have the advantage of being able to spread the risk of hurricane losses over their portfolios while in condominiums, associations almost always carry the necessary insurance.”
Investors might not be aware, however, that policies don’t typically cover the interior of units. What’s more, with the high number of unsold and bank-owned units, many buildings levy special assessments against owners to pay the high premiums. Kurry says brokers can help alleviate some of these concerns by obtaining price quotes for windstorm and, if necessary, flood policies in advance, and by obtaining budget and insurance information from condominium associations.
Nicole Persley, a broker/owner at Homage Real Estate of Florida in Boca Raton, has a slightly different take. In her experience, investors do tend to wait out hurricane season before buying.
“If there is a bad storm and the media hypes it up, as they most definitely will, the Florida real estate market will sustain an even bigger correction than the one it is currently in,” Persley says. “However, if the season does not have any damaging or scary storms with Florida in the path there may be a small buying rally after hurricane season is over.”
Jeremy Jones, a realtor with Distinctive Homes Realty in Fort Lauderdale, takes the middle of the road view. Hurricane season is definitely a consideration for buyers, he says, but it won’t stop people who are serious about buying a home. Like Persley, though, Jones says that prognosis could change if a storm hits.
“If we are unfortunate enough to experience a hurricane here that delivers extensive damage, then I do see that affecting our already sluggish real estate market,” Jones says. “Buyers are somewhat encouraged now with prices dropping to what they see as affordable levels. But one bad hurricane could make the current credit crisis from sub-prime mortgages the least of our concern as it relates to real estate sales.”