James and Laura Molinari moved to Flamingo Park from Chicago for a two-story stucco home. The four-bedroom mansion was a short bridge from Palm Beach Island and walking distance from downtown West Palm Beach. “We love it here,” said James, who golfs with his 3-year-old son on Saturdays and swims year-round in his backyard pool. Next came his home insurance renewal.
Because of the high cost of insurance, there were 1.25 million properties on the market as of the end of September, according to a report by the National Association of Realtors (Source: National Association of Realtors/ The Motley Fool).
Cost of Insurance Premiums
The increased rate for the year starting in September was $121,000, more than seven times what the Molinaris paid last year and 13 times what they paid when they moved to Florida in 2019. Despite finding a cheaper rate from another insurance, it’s still nearly double what they paid last year at $33,000. After insurance expenses made remaining there too pricey, the family placed the home for sale this month at roughly $3.5 million. Other Flamingo Park residents told The Wall Street Journal they agree.
James described the neighborhood as having several for-sale signs. The rising cost of insurance in Florida might derail the housing industry. According to Redfin, Florida property prices rose 60% and more during 2019. Redfin said that September property prices in the state rose 2.7% over the previous year, slowing that trend. Brokers believe rising interest rates and the price run-up are the greatest culprits, although greater insurance costs also contributing.
All home insurance premiums are growing, but Florida premiums have tripled in five years. The CEO of NSI Insurance Group, Oscar Seikaly, said he had handled insurance rates of $600,000 a year for multimillion-dollar residences. When your home is worth $1 million or less, your insurance premium exceeds your mortgage, he added. The state’s insurance business is in trouble due to harsh weather, greater rebuilding costs, and more litigation. Several insurers left the state. Last year, Gov. Ron DeSantis signed a bill to lower litigation and insurance costs, but industry leaders say it’s not enough.
READ ALSO: Get A Home Property Trust To Protect Your Home!
Residents Dropped Their Insurance Due to High Cost
Many homeowners have dropped insurance due to rising premiums. Some homeowners without mortgages have eliminated all their insurance, but others have withdrawn only their wind policy, which pays off after a hurricane and has the fastest price increases. Insurance increases are minimal for newer properties. Many homeowners in Flamingo Park have seen their insurance bills quadruple in the past year due to older, historic homes and rising property values. On a coastal ridge, most West Palm Beach properties are above sea level and outside the flood zone, yet wind insurance rates are high.
Mortgage lenders usually need home insurance. However, over a dozen Flamingo Park residents who have paid off their mortgages said they discontinued some cost of insurance coverage this year because they could no longer afford or stomach the premiums. This state is prone to violent tropical storms and hurricanes, therefore those without it risk it. If a weather event destroys the house, the owners may be liable for all belongings and removal fees. Still, Pete and Susan Sinclair say every Flamingo Park homeowner they know has declined storm insurance.
A 1,000-square-foot New England-style villa in West Palm Beach was purchased by the Sinclairs 18 years ago. This year, their renewal cost $10,000, up 40% from last year, so they dropped their insurance and “went bare.” It’s insane. Pete, 72, a former boat painter, said he felt duped. “If the house blows over, we can sell the land and move on,” Susan remarked. Even Palm Beach County Mayor Gregg Weiss, who lives in the neighborhood, dropped his insurance when the rate quadrupled to $20,000. He paid off his mortgage instead of insurance. Weiss: “I know a lot of people who have done the same thing. “The market makes sense no more.”
Three years ago, 51-year-old Scott Smith relocated from Atlanta to the neighborhood. This year, his insurance rose to nearly $14,000. He was astonished to find that his Atlanta insurance didn’t function in Florida when he relocated there. He may have to sell if he can’t lower his price this year. He remarked, “This is robbery,” noting that he spent about $2,000 in insurance on a $2 million Atlanta home. Taxes and property insurance exceed our mortgage payment.
READ ALSO: State Property Tax Rebates in Pennsylvania – Get Ready for the Refund Distribution!
