Let’s all just take a breath

Castles in the Sand

How would you feel lounging on your deck overlooking the shining waters of the Gulf of Mexico and reading this headline: “As seas rise, your coastal home in Florida could lose value by 15% by 2030?” In mid-January, that’s just what the Miami Herald had in their paper and it only got worse when you read the copy.

The Herald outlined two new reports that calculated how much of an impact climate change will have on Florida’s real estate. One report from the international consulting giant McKinsey Global predicted that Florida homes subject to the risk of flooding could lose 5-15% of their value in the next decade, and by 2050 that could increase to 15-35%. The second report from the Miami-Dade-focused report from Jupiter Intelligence said their researchers found that moderate flooding of about one foot will affect nearly double the number of homes by 2050.

Both reports are talking about a relatively new topic in the financial world called “climate risk” and it explains all the ways that the warming world will influence the global financial systems. Florida, particularly south Florida, appears to be the guinea pig for the rest of the country’s coastal communities.

Essentially, the major issues are insurance, mortgages and potential buyers. Anyone who lives within spitting distance of the water lives with insurance anxiety a good part of the time. These studies contend that as climate change affects rising sea levels and consequently flooding, insurance premiums will go up as will premiums for hurricane coverage and windstorm insurance. The National Flood Insurance Program, which has been the topic of a lot of speculation during the past several years, is redesigning its rates to better reflect risk next year. Currently, Florida represents 35% of all policies held by The National Flood Insurance Program.

Mortgages may be more expensive to get once banks realize that a home facing the prospect of going underwater isn’t a sound investment, or totally decline to issue mortgages on these properties. And finally, will these studies and subsequent reporting scare buyers away from purchasing in coastal communities? It’s not a stretch to assume that local budgets could be affected as municipalities attempt to gear up for additional expenses associated with more flooding. Speculators have even suggested a negative coming market shift in coastal properties as climate change affects real estate to be as bad as the mortgage crisis a decade ago.

What I think is that everyone needs to take a breath. Yes, there could be a change to the real estate market for coastal properties, but do we really know when and how severe that will be? Comparing it to the mortgage bubble crisis 10 years ago is really just someone’s opinion. Should buyers not buy waterfront property based on these early reports? Maybe if you have zero tolerance for risk in your life. If that’s the case, better not invest in property at all because who knows, based on a lot of recent reports, beings from other solar systems may be visiting us and who knows what their agenda is. In addition, not all coastal areas are created equal; some are more at risk than others and a little research will help buyers determine that.

So be careful what you read. It may all come true, but right now I don’t care who you are, no one really knows what property values will be in 2050. Just go to the beach and enjoy.