Biggert Waters Flood Insurance + More Foreclosures= Real Estate CRASH!

Those the follow the news have been treated to a steady stream of propaganda about the improving Florida real estate market.  Home sales up! Prices up! All is well!  Right?  Florida has turned the corner on the devastating economic crisis that impacted so many of us….right?

Well…not so fast.  First, digging a bit deeper into the existing data reveals that the “recovery” such as it was really is not stable.  Worse, and of far more devastating consequences, the old adage, “What Goes Up Must Come Down” is about to hit Florida real estate in a very profound way.  There are a variety of factors that are already starting to have profoundly negative consequences…those factors will increase…AND THE CONSEQUENCES WILL BE DEVASTATING TO FLORIDA REAL ESTATE AND OUR LOCAL ECONOMY!  Let’s examine just two massive problems that are about to hit Florida from one coast to the next, with particular impact right here in Pinellas County.

1. Florida Courts Flooding The Market With Foreclosed Homes

Remember the National Mortgage Settlement and all the promised “Relief” For Homeowners?  Well, in Florida one of the big components of the “relief” was hundreds of millions of dollars pumped into foreclosure courtrooms with the express condition that this money be used to push foreclosures out of the courtrooms.  And so in Florida, where there are already nearly 400,000 foreclosure cases sitting in the courtrooms, judges are working furiously to conclude those cases….with Final Judgments and foreclosure sales.  Make no mistake…this is not what “the banks” wanted and it’s certainly not what they want now.  They were perfectly happy to manage the inventory of new homes hitting the market, but the Florida Legislature spoke, the courts listened and now counties will soon be flooded with new, distressed inventory.

In Pinellas County, we have approximately 30,000 foreclosures sitting in foreclosure courtrooms. A major purge is underway with millions of taxpayer dollars being spent to help the banks conclude the cases through foreclosure sales and public auctions.  The concentration of these auctions is in the neighborhoods that are already suffering in this economy….and the concentrated impact of the foreclosure purge will only become more dramatic.

2. The Biggert Waters Flood Act

Speaking of flood…the cost of flood insurance was rarely a consideration for most Floridians.  But that’s changing in a most dramatic and devastating way.  Effective October 1, 2013, the rates for flood insurance premiums are going to begin either increasing significantly or SKYROCKETING THROUGH THE ROOF depending on the age of your home and its flood elevation level.  Not much has been said about this yet…but just wait.  Entire communities are about to be devastated and coastal counties are going to see hundreds of millions of dollars in property values disappear overnight.  Already Realtors and other professionals are starting to see the dramatic consequences of this disaster in progress.  And in the next several months, mortgage servicers are going to start analyzing escrow accounts and will start demanding monthly payment increases of hundreds or thousands of dollars.  For the millions of Floridians that are already struggling….WATCH OUT…this spells financial disaster and will trigger a whole new round of foreclosure filings.

Why Are Policy Makers And “Leaders” Ignoring The Crisis That is Happening Right Now?

It of course is most disturbing that you won’t hear any policy makers that are talking about these issues….much less offering any suggestion at all that they recognize the catastrophe they have created.  This willful ignorance was particularly manifested in the 2013 Florida Legislative Session when legislators screamed and demanded that courts must CLEAR THE FORECLOSURE BACKLOG….with exactly zero concern for the fact that the fragile Florida economy could not absorb the inventory that is now being pushed onto the market. I wonder if they’ll start to think about that now?  Even worse is the devastating impact of the flood insurance rate increases.  The premium dollars increases were known and debated in Congress, but the general public heard nothing about it.  Worse, the public is still not prepared for the decreases in property values that are coming…..the state’s “leaders”, such as they are failed to keep their voters advised.

So what can you do?  Stay tuned to this channel and watch out….it’s going to get bad.  And then it’s going to get worse.

For many consumers, they will have to start making real choices about what bills they are able to afford….prioritizing between things like food and basic necessities for their children and families. Consumers will need to watch their mail carefully for notices of those increases and be prepared to take appropriate action to protect their families…