Can Florida’s Condo Market Survive These Threats?

I just closed selling our Villa (condo HOA) in a Lee Co. gated community which after 8 months still has not resolved Hurricane Ian's insurance claim. I personally had no damage but about 1/4 of the community had damage. The catch was that due to condo rules, all roofs must match even if you had no damage. With a 5% deductible to reduce premiums, the entire community owners will likely eventually suffer replacement cost - who knows for how much. For me it was not worth the angst. The costs of the condo HOA fees far surpass my PA tax bill. I can take an annual vacation for a week or two in the sun and still sleep at night.

As if I needed any more reasons not to live in Florida. The State has a real estate boom and bust history and has been on an upswing for too long due to short supply. Sellers depend on the Greater Fool than themselves to come along and bail them out when the negatives outweigh the positives. No State income tax, but some of the highest property taxes, homeowners fees, insurance costs and energy costs in the country. Blood sucking, disease carrying insects and invasive giant reptiles. And don’t forget Florida Man- that term is now a cultural icon for any Rando Florida Dude doing something stupid and usually criminal…sheesh! If you need a sunshine fix, save your money and head to Latin American for a month or two and save yourself the heartache. International Airfares are higher than ever, but you can save on day to day living expenses with an extended stay. And best of all- you’re not tied down to some money pit of a home.

This is a great idea and point of view. Our winter here where we live near Chicago was mild, I hope it was due to global warming and continue. Sorry about that but the Midwest may be a great place after all. We will be happy to rent 2 or 3 months near a beach somewhere.

It will be interesting to see how this plays out. A lot of negative forces colliding with strong demand. Soaring insurance rates will affect just about everyone there, and the building reserves will be huge for associations.

I believe I’ve mentioned these ideas here before, but I’ll go over them again. If looking for a condo in Florida, narrow it down to those that are less than three stories. That avoids the possibly onerous costs being placed by law on condos of three stories or more in terms of periodic structural inspections and repair reserves. Structural issues in condos two stories or less are significantly less than in taller ones. There are many, many thousands of condos of that lower height in the state. Don’t buy within 3-5 miles of the coast. You can still get to the beach in a matter of minutes in most situations if you want. Such a location usually lessens insurance costs, and often property taxes, quite a bit. As to the roofs needing to look alike, consider a condo with a flat roof. If the roof cannot be seen, coordination of appearance is a non-issue. Even though condos less than three stories don’t require certain structural inspections and fully-funded structural repair reserves under the recent law changes, it’s still highly advisable to review the reserves of an HOA covering any condo you consider purchasing. There are still a number of other reserves that should be appropriately funded (painting, reroofing, basic repairs, etc.) and you want to make sure these reserves are currently adequately funded in order to avoid high special assessments later. There are many good condo opportunities in Florida still existing. You just need to narrow your search, and look carefully, to find them. Bottom line, the weather anyplace in Florida is beautiful much of the year, regardless of what type of condo or home you live in or where it’s located. The state remains an excellent choice for many, but not all, prospective owners.

Our FL condo association had $291,000 in this year's budget for property insurance and the bill just came in. It is for $380,000, a 30% increase over what we had estimated. Appears like we will either have to adjust the quarterly HOA fees for the rest of the year or have a special assessment to cover it. These insurance increases are real - and hurting.

Whether it’s a special assessment or increase in HOA fees to cover the insurance, the consequences are permanent since it’s a virtually forgone conclusion that condo and homeowners insurance (everywhere, not just Florida) will continue to rise, sometimes steeply. Any such HOA increase will be built in permanently and if you instead do a special assessment, it’s likely such an assessment will need to be repeated in future years if HOA fees are not increased now. Is there a solution in Florida for higher insurance costs? Not likely. The only possibility I see is for the state to further subsidize the state-run insurance company, Citizens (which insures more owners in the state than any other company), as well as the private companies insuring real estate. This would require a massive infusion of cash from the state treasury, which it doesn’t have lying around.. That cash could only be raised by a tax increase, which likely won’t happen in Florida because the governor and the majority in the legislature are totally against ANY tax increases, no matter the reason. I fear the condo owners in Florida are permanently saddled with this costly insurance problem, except possibly for those in condos of less than three stories that are several miles away from the coast and not in a flood plain. If anyone else sees a workable solution, I’d like to hear about it.

Just so you don't think FL is alone in this, California is rattled by two major insurers pulling out of the golden state. Wildfires and construction costs are the culprits there.

It seems, the dream of home ownership is dying in the USA, at least for the middle class. Renting may become the only good option for average residents, including average retirees like myself. In one of every three residential home sales now, the buyer is a corporation. Your landlord will likely be a faceless limited liability corporation. (LLC). Commercial real estate has withered since many workers now do their thing remotely, so companies are scooping up homes instead. Will the empty offices be converted to personal residences? It’s doubtful that everyone will return to office work…The 5% rule states that if you can rent for less than %5 of the price of buying, then you should rent rather than buy. Example-a home selling for $500,000. Rent on said home is less than $25,000 a year. In this case renting might make more sense. Of course, even rents could be too high for many folks too. Renting could make more sense especially for retirees, because our life expectancy is-how shall we say-not what it used to be. Finally, If you don’t have children, you are less likely to care about real estate as a legacy. Perhaps, It would be better, if people would become a little less concerned with owning things in their twilight years . Like the ancient Romans said “enjoy yourself. It’s later than you think.”

Florida and nine other states have filed a lawsuit against the federal government, opposing sharp increases to the cost of flood insurance through the national flood insurance program.
Groups in Florida including FIRM have also come out against the Citizens insurance company's requirement that Citizens policyholders must secure and maintain flood insurance, regardless of whether they are in areas prone to inundation, elevated, or do not have a federally backed mortgage.”
In another development, Governor DeSantis recently signed the much anticipated Surfside Glitch Bill, SB 154, into law. The bill relieves some of the ambiguity in SB 154. It also provided relief for some provisions of the law such as allowing a Milestone Inspection to be provided by a team of professionals with an architect or an engineer acting as a registered design professional in charge of the report (the supply of inspectors was an issue). Other clarifications had to do with reserve requirements. In one provision, reserves are not needed for replacement costs for items for which the estimated remaining useful life exceeds 25 years (but reserves are still required for deferred maintenance for those items).

Farmers Insurance has stopped writing policies in Florida, affecting 100,000 policyholders. It will no longer offer home, auto and umbrella policies. Thousands of homeowners will have to change their insurance provider. Meanwhile in California two insurance industry giants, Allstate and State Farm, have pulled back from California’s home insurance market. The companies blame increasing wildfire risk and soaring construction costs.

I was looking into buying a condo in Tampa. With all the uncertainty in weather, insurance and structural issues I changed my mind. I can take extended vacations to FL (probably for the cost of yearly HOA fees) and live in another area of the country. Moving to FL is completely off of my radar. Sad.

AAA has announced it will stop writing "a limited" number of combined auto and home policies in Florida. Since 2022 seven insurers have been declared insolvent in Florida. Average annual property insurance premiums jumped 42% this year to $6,000 in Florida,

Can you set aside or allocate reserve funds to pay yearly insurance premiums in Florida?

Under the strict new SB 4-D reserve rules in Florida reserve funds (buildings 3 stories and over) cannot be used for anything other than their intended purpose. Previous to that they could be, if in a properly called meeting a majority of owners present there approve it by vote (this still might apply to buildings less than 3 stories). Other options, including what our HOA did in Florida, is to amend the budget midway through the year and have higher dues pay for the increase. Or, you could borrow money to pay them. In practice the wisest policy is to pay the increased costs in the current year, either by assessment or an increase in the dues. The new reserve requirements are so strict that most associations are facing much higher dues to meet them, so spending them down for current expenses just kicks an expensive can down the road.

The Florida Roundup has an excellent radio show about the fastest group of new workers in Florida - people over 65! Although some of these new workers missed working and went back in to stay busy, many more are finding that higher HOA fees, insurance, medical and dental expenses, or just inflation mean they just can't make ends meet without a job of some kind. https://www.wlrn.org/podcast/the-florida-roundup/2024-04-19/why-some-retired-floridians-return-to-work-remembering-bob-graham-and-environmental-news