Some Insurers Dropping Owners Who Install Solar Panels

 By Ron Hurtibise

Homeowners adding solar panels study energy savings and break-even costs, but they should also call their insurer: Some increase premiums and some cancel policies.

FORT LAUDERDALE, Fla. – As electric bills surge and the federal government offers generous tax incentives for renewable energy investments, more and more Florida homeowners are seriously considering rooftop solar systems.

But in calculating system costs vs. electric bill savings, many would-be solar owners are neglecting to consider how a solar system will affect their home insurance bill – or how difficult it might be to find a company that will insure them at all.

And with insurance premiums skyrocketing for all Florida homeowners, solar customers who can obtain coverage might also find that the price increase will wipe out any energy-cost savings they expected from going solar.

“It’s a big deal and a lot of folks don’t realize that many carriers don’t accept solar panels,” says Dulce Suarez-Resnick, vice president at the Miami-based agency Acentria Insurance.

Oakland Park homeowner Holy Strawbridge learned this the hard way. She installed a modest 8,000 kilowatt system atop her home about two years ago and recently signed up for coverage with Edison Insurance Company. After the insurer sent an inspector to her home, she received a letter canceling her entire policy.

“I was shocked,” Strawbridge said. “I’ve never filed an insurance claim and I’ve lived in this house since 2001.”

The reasons cited in the cancellation letter sent by Edison: Her solar panels are ineligible for coverage due to the age of her roof (11 years) and because she has a tile roof.

Those aren’t the only reasons insurers won’t cover rooftop solar systems, according to interviews with solar installers, solar energy advocates, and insurance agents. Insurers who do business in Florida offer a wide variety of reasons for refusing to insure homes with them.

Net metering flagged by insurers

Increasingly, insurers are claiming that solar systems with net metering connections to utilities – which is virtually all of them in Florida – pose a unique risk of injury to line workers and damage to the utility grid.

Florida Power & Light’s net metering contract requires homeowners to take responsibility for all potential damages, says Ryan Papy, president of Palmetto Bay-based Keyes Insurance. “So if there’s a surge running through your panels that causes damage to the grid or other homes, the client is responsible.”

Solar installers and advocates call that justification unfounded. They say all equipment used to connect rooftop solar systems to the grid comply with state building and electrical codes and are inspected by utilities before new systems are activated. Utilities also have authority to come onto solar owners’ properties and disconnect them if they suspect any safety issues, they say.

Solar advocates wonder if the net metering concerns are just excuse insurers are giving to justify dropping customers.

Many insurers who operate in Florida, faced with mounting losses, have been dropping or nonrenewing policies to reduce the amount of overall risk they carry on their books of business. In some cases, state insurance regulators have ordered insurers to shed policies so they can afford to purchase reinsurance – insurance that insurers must carry to be able to pay all claims after a catastrophe.

Justin Hoysradt, president of Vinyasun, a solar installation company based in West Palm Beach, says the potential dangers of backfeeding are exaggerated. Since 2006, all power-producing inverters have complied with an electrical standard called U.L. 1741, Hoysradt said. This standard requires solar system inverters to be able to detect utility outages or any odd voltage disruption and automatically disconnect the solar systems from the grid.

Hoysradt says he is unaware of any documented instance of injury or damage from a properly installed UL 1741-certified inverter. The cut-off technology is so dependable that utilities recently removed a requirement that solar systems be equipped with separate redundant manual lockable disconnects, he said.

Until about a year ago, Hoysradt rarely heard customers complain that they couldn’t find or keep insurance because of their solar systems. Now, at least one potential customer a day says their insurer could not guarantee they wouldn’t be dropped if they install solar, he said.

Other insurers have told homeowners that net metering turns them into commercial utilities and they are no longer eligible for homeowner insurance policies, said Heaven Campbell, Florida program directors for Solar United Neighbors, a nationwide nonprofit that helps solar customers form co-ops to secure better pricing. Campbell says her organization has documented about 60 homeowner complaints over the past year. They either say they’ve been cancelled after installing solar panels or told they would no longer be eligible for coverage if they install panels, she said.

Insurer cites numerous concerns

Olympus Insurance laid out an extensive list of concerns about property and liability exposures in a 2020 filing with the Office of Insurance Regulation, while seeking approval to exclude solar systems from the risks it must cover. They included increased exposure for damage due to wind uplift when solar panels are attached to a roof, increased exposure for wind or hail damage to the solar system itself, fire hazards from loose or poorly connected parts or wires, increased risk or electrocution, presence of toxic materials and byproducts of the panels themselves, and potential liability associated with backfeeding to the grid.

Without commenting on the validity of the concerns, the Office of Insurance Regulation told Olympus it could not allow a broad mandatory exclusion for coverage of solar unless the company provided an option for solar owners to “buy back” the coverage at an increased price. Olympus withdrew the filing. It could not be immediately determined from the office’s filing database whether the company resubmitted it with the buy-back option.

Campbell disputes claims that rooftop solar systems make roofs more susceptible to wind uplift during hurricanes. She said after Hurricane Michael struck the Panhandle in October 2018, many roofs with solar panels remained intact amid roofs without solar panels that were destroyed.

Solar United Neighbors’ website contains numerous photos of installations that held up in storms that damaged roofs of surrounding homes. Campbell says modern building codes actually make roofs with solar panels better able to withstand winds.

Paul Handerhan, president of the consumer focused Federal Association for Insurance Reform, said concerns about wind uplift stem from the potential for increased damage if solar panels and roofs are torn from homes together.

Suarez-Resnick concurs: “With stronger winds like a Category 3 hurricane, you might have much more damage if panels go flying and land on your neighbor’s roof or car.”

Companies that do insure rooftop solar systems are allowed to set strict conditions for that coverage, filings show.

Edison, the company that cancelled Strawbridge’s policy, will only cover homes with solar systems that were installed after 2016, on shingle or metal roofs no older than 10 years, on flat roofs no older than five years, and produce no more 10 kilowatts of electricity, which is more or less the typical rooftop system capacity.

As Strawbridge found out, Edison will not insure solar systems mounted on clay or tile roofs. Stacey Giulianti, chief legal officer at Florida Peninsula Insurance Company, parent company of Edison, said, “We chose not to insure solar panels on tile roof homes due to the challenges presented by the attachment of the panels to the roofs. Most tile roof installations require attachment brackets which must pierce the tile roofs.”

Solar panels are routinely installed without piercing tiles, Hoysradt said. Many installers remove clay tiles at the point where solar posts attach to the roof and replace them with aluminum tiles that won’t break or crack when drilled.

Hoysradt noted that state licensing requirements for solar installers require knowledge of roofing, electrical and plumbing construction. “We’re not just a bunch of people taking roofs apart with no experience,” he said. “There’s no reason for insurance carriers to not cover solar on a tile roof.”

Nevertheless, rooftop solar consumers can expect to find a hodgepodge of insurance rules unless and until the state Legislature decides to enact common coverage standards.

Common standards for insuring solar?

The national trade organization Solar Energy Industries Association is working with fellow solar advocacy groups Florida SEIA, Solar United Neighbors and Vote Solar to reach out to insurers and try to develop legislation to eliminate confusion about insurance practices, said Will Giese, the association’s Southeast regional director.

The good news for Strawbridge and other solar owners is there are insurers that do not prohibit coverage of homes with solar systems or impose a long list of restrictions on coverage. They include state-owned Citizens Property Insurance Corp., the so-called “insurer of last resort.”

Citizens covers solar systems as part of the structure. No special endorsements or add-ons are required, spokesman Michael Peltier said. “They would just be added into the replacement value of the home,” he said. Of course, adding solar panels increases the value of a home, so homeowners can expect to pay a higher premium when they add solar.

One mistake a homeowner should never make: Installing a solar system without checking insurance options, Suarez-Resnick said. An agent can tell you whether your roof is nearing the end of its life and should be replaced first. It’s a pain to find new insurance, and it’s costly to remove and replace solar panels because Citizens or another insurer demands that you get a new roof.

Or you might look for a solar installer, like Universal Contracting and Solar, that specializes in bundling roof replacements and solar installations. You can get long-term financing and qualify for the 30% federal tax credit to offset cost of the combined job, says Jenifer Kempka, the company’s director of business development.

“Right now is the best time to go solar,” she said.

© 2022 South Florida Sun-Sentinel. Distributed by Tribune Content Agency, LLC.

FHFA: U.S. 2nd Quarter Prices Up 17.7% – But Over 26% in Florida

 By Kerry Smith

Of 100 metros tracked by government-backed mortgages, 8 Fla. cities hold top-11 spots, with Sarasota-Bradenton (up 36.5%) and Cape Coral-Fort Myers (36.0%) at the top.

WASHINGTON – It’s hard to underestimate the strength of Florida’s current home price increases in the second quarter of 2022 based on the Federal Housing Finance Agency House Price Index (FHFA HPI).

Index scores are based on mortgages – more than half of all in the U.S. – backed by Fannie Mae and Freddie Mac.

Of the 100 cities the index tracks, almost all Florida metros anchored the top 10 for year-over-year price increases, including two metros in the first and second spots. Only one Florida city, Miami-Miami Beach-Kendall, didn’t make the top 10, and it was No. 11.

Overall U.S. house prices rose 17.7% year-to-year in the second quarter (4.0% quarter-to-quarter), but no Florida metro area had an increase less than 26%.

Top 100 rank of Florida metros and year-to-year price increase

1. North Port-Sarasota-Bradenton: 36.5%

2. Cape Coral-Fort Myers: 36.0%

4. Tampa-St. Petersburg-Clearwater: 29.6%

5. Jacksonville: 29.0%

8. Fort Lauderdale-Pompano Beach-Sunrise: 26.9%

9. West Palm Beach-Boa Raton-Boynton Beach: 26.4%

10. Orlando-Kissimmee-Sanford: 26.3%

11. Miami-Miami Beach-Kendall: 26.1%

Overall, however, the nation started seeing a slowdown in the rate of home-price increases.

“Housing prices grew quickly through most of the second quarter of 2022, but a deceleration has appeared in the June monthly data” says William Doerner, Ph.D., supervisory economist in FHFA’s Division of Research and Statistics. “The pace of growth has subsided recently, which is consistent with other recent housing data.”

Other 2Q findings

• U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.
• House prices rose in all 50 states and the District of Columbia year-to-year. The five areas with the highest annual appreciation were: Florida 29.8%, Arizona 25.5%, North Carolina 25.2%, Montana 24.9% and Tennessee 24.3%
• The areas with the lowest annual appreciation were the District of Columbia 5.2%, North Dakota 10.6%, Louisiana 10.8%, Minnesota 11.3% and Maryland 12.0%.
• House prices rose in all of the top 100 largest metropolitan areas over the last four quarters greatest in North Port-Sarasota-Bradenton (up 36.4%) and weakest in Washington-Arlington-Alexandria (up 9.1%).

© 2022 Florida Realtors®

Buyers Skittish? For Many, It’s Just Market Weirdness

 By Swapna Venugopal Ramaswamy

Rising prices and mortgage rates deter homebuyers, but for many, the rapid changes are simply disconcerting. It makes them wonder what will happen next.

NEW YORK – In just six months, Sam Brinton, a real estate agent in Salt Lake City, has witnessed a complete reversal in buyer sentiment.

“It’s a night and day difference,” he says.

Last year, even as the pandemic housing market pushed home prices ever higher and bidding wars were an expected part of the home buying process, buyers were motivated enough to stay in the game.

The last few months have been the opposite.

“They are confused and hesitant now. Many buyers are sitting on the sidelines because the market has cooled down so much,” says Brinton. The cooling housing market has further fueled the demand for rental units, driving rental prices even higher.

Why are people thinking about renting?

It’s been a nerve-wracking time for homebuyers grappling with still-soaring prices for existing homes despite rising inventory, falling home sales and volatile interest rates.

The average 30-year fixed mortgage rate went from 3.22% on Jan. 6 to 5.55% on Aug. 25, according to Freddie Mac. Existing home sales fell for the sixth consecutive month with sales down 6% from June and 20% from one year ago.

The wait-and-watch approach by buyers is prompting a high share of home sellers to drop their asking price. More than 15% of home sellers dropped their asking price in the 97 largest U.S. metropolitan areas, according to a report from Redfin.

In pandemic boomtowns, it was much more drastic.

In Salt Lake City, for instance, 56% of homes for sale had a price drop in July. Nearly 70% of homes for sale in Boise, Idaho, had a price drop in July, the highest share of the 97 metros.

“Last year, the market forces pushed you into a home and pushed you into doing it sooner than you wanted. It was like ‘now, now, now, high, high, high,’” says Brinton. “Whereas now the market forces are pulling you away. Even someone who’s ready to go is kind of dragging their feet.”

The median existing home sales price climbed 11% from one year ago to $403,800 in July, marking 125 consecutive months of year-over-year increases. However, it was down by $10,000 from June’s record high of $413, 800, according to National Association of Realtors data.

Should you buy or rent?

The median monthly asking rent in the U.S. surpassed $2,000 for the first time in May, rising 15% year-over-year to a record high of $2,002. Asking rents were up over 30% in Cincinnati, Seattle, and Nashville, Tennessee, and nearly 50% in Austin, Texas.

In July, the national median asking rent was up 14% year-over-year to $2,032.

“Rent prices have gone up in the last 18 months, much faster than any other time in recent history,” says housing analyst Logan Mohtashami. “So the question is, ‘Can you tolerate the rent increases on a yearly basis?’”

With a home purchase, even at a higher interest rate, a buyer is opting for a fixed payment plan, says Mohtashami. And if mortgage rates go down next year, homebuyers have the option to refinance.

“It’s a savagely unhealthy housing market in the sense that mortgage rates have gone up so much and home prices are still rising,” he says. “So there’s a lot of people who just simply can’t afford to buy a house after this year, so they’re going to be renting no matter what.”

Brinton says a client who is relocating from Maine to Salt Lake City spent a few weeks looking for a home before deciding to explore the rental market. A few weeks later, she was back, wanting to resume her house hunting.

“She realized that (renting) was an expensive option,” says Brinton. “Rental prices are so high here and they are only going higher as more and more people have dropped out due to interest rates.”

While nationally it is still more expensive in terms of monthly payments (assuming a 5% down payment) to buy ($2,316) than rent ($2,016), in some markets, such as Fort Lauderdale and Miami in Florida, Cincinnati, Detroit, and Boston, it is now cheaper to buy a home than to rent.

The downside of waiting to buy a home is that you’ll have to sign a lease if you need a place to stay and it’s not a second home, says Daryl Fairweather, chief economist at Redfin.

“And that lease is going to be expensive. A lot of these would-be homebuyers are turning to the rental market and that’s sustaining demand on the rental side,” she says. “Even as people’s budgets are pinched by higher inflation and higher interest rates.”

Are we in a housing recession?

For new home construction, yes, according to the experts. Rising mortgage rates and higher costs of construction are causing a “housing recession,” says Robert Dietz, the chief economist at the National Home Builders Association.

Builder confidence fell for eight straight months in August as elevated interest rates, ongoing supply chain problems and high home prices continue to exacerbate housing affordability challenges, according to a association’s survey.

Nearly 1 in 5 home builders reported reducing prices by roughly 5% in the past month to increase sales or limit cancellations. New home sales were nearly 30% lower in July compared with July of last year.

For existing homes, including single-family homes, townhomes, condominiums, and co-ops, sales fell 20% year-over-year in July, according to the National Association of Realtors. While all four major U.S. regions experienced year-over-year sales declines, the northeast region saw an uptick in month-over-month sales.

Buyers also have more to choose from, with unsold inventory now at a 3.3-month supply, up from 3 months in June and 2.5 months in June 2021. Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.

“The national inventory level is still below 2019 levels, and so another wave of lowered mortgage rates could keep the home price growth in the high single digits,” says Mohtashami.

If you plan on living in your new home for two years or less, it is better to rent, says Lawrence Yun, the chief economist for the National Association of Realtors. If it’s more than five years, it makes sense to buy.

“If you financially qualify for a house in the neighborhood you want to live in, it’s a good idea to buy,” he says. “The chance of a price decline is probably minimal, but if it does occur, it’ll be only for a short duration. But if you don’t buy, you are just paying rent and then higher rent then further higher rent with each passing year and one could potentially miss out on the price gains.”

Buying? Plan for ‘long game’

Scott Golub and his wife, Annmarie, recently confronted that decision. The couple is moving from their apartment in Queens to their new home in Pleasantville, New York, this week.

After having spent more than a year looking for homes in the area, and losing out on multiple homes, the couple, who has a 4-year-old daughter and another child on the way, found a home that was close to schools, easily accessible to the downtown, and had a good-sized yard. After being outbid more than three times over the past year, they made an all-cash offer, with help from Annmarie’s parents. The couple paid $940,000, or $90,000 above the asking price for the 2,300-square-foot home listed at $850,000.

“The house hit every box we wanted,” he says. “We didn’t want to take a chance on losing out on it,” he says.

Natalia Wixom, Golub’s agent says the couple had done their homework and were confident buyers.

In the coming months, with rising inventory, sellers will have to prepare homes better and price them more carefully, says Wixom.

Asked if he was worried about the softening housing market, Golub said it wasn’t a concern.

“Obviously, we don’t want to lose value on the house, but this is a house that we plan on being 30 years plus,” he says. “So it’s kind of a long game.”

Copyright 2022, USATODAY.com, USA TODAY

NAR: Pending Home Sales Slip 1.0% in July

 By Kerry Smith

While small, 1% is the second monthly sales drop in a row, with 8 in the past 9 months. Year-to-year, contract signings fell by double digits in all four U.S. regions.

WASHINGTON – Pending home sales declined for the second consecutive month in July, and for the eighth time in the last nine months, according to the National Association of Realtors® (NAR).

Of the four major regions included in NAR’s monthly report, three registered month-over-month decreases, while the West notched a minor gain. Year-over-year, however, all four regions saw double-digit percentage slides, with the largest also in the West.

The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – slid 1.0% to 89.8 in July. Year-over-year, pending transactions sank 19.9%. An index of 100 is equal to the level of contract activity in 2001.

“In terms of the current housing cycle, we may be at or close to the bottom in contract signings,” says NAR Chief Economist Lawrence Yun. “This month’s very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”

In June, housing affordability plummeted to its lowest level since 1989, according to NAR. Accounting for a 30-year fixed-rate mortgage and a 20% down payment, the monthly mortgage payment on a typical home jumped to $1,944 – a year-to-year increase of 54%, or $679.

“Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023,” Yun says. “With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year.”

Pending home sales regional breakdown: The Northeast PHSI dipped 1.9% from last month to 79.3, and it’d down 15.4% from July 2021. The Midwest index retracted 2.7% to 91.2 in July, a 13.4% decline year-to-year.

The South PHSI decreased 1.1% to 106.6 in July, a pullback of 20.0% from the previous year. The West index increased 2.2% in July to 70.0, down 30.1% year-to-year.

© 2022 Florida Realtors®

Home Affordability Hits Lowest Point since 1989

By Melissa Dittmann Tracey

NAR: Housing affordability reached a 33-year low in June, according to NAR data – but an inventory increase and stabilizing mortgage rates may help.

WASHINGTON – The average monthly mortgage payment jumped 54% year-over-year in June, while median household income rose only 5.8%, according to the National Association of Realtors® (NAR)’ Housing Affordability Index. As home affordability weakened, the median home price shot to a record $413,800 in June, and NAR’s index fell to its lowest reading in 33 years.

“Home prices have increased at a pace that far exceeds wage gains, especially for low- and middle-income workers,” says NAR Chief Economist Lawrence Yun.

Housing affordability “dramatically tumbled” in the second quarter amid rising mortgage rates and climbing home prices, NAR data shows. Monthly mortgage payments on a typical existing single-family home surged by nearly a third compared to the first quarter of 2022, and by half compared to a year earlier.

The 30-year fixed-rate mortgage has nearly doubled in the past year, though they’ve stabilized somewhat this month.

Monthly mortgage costs

The average monthly mortgage payment rose to $1,944 in June from $1,265 a year earlier – a $679 difference, NAR notes.

The annual mortgage payment as a percentage of income rose to 25.4%, and most financial experts consider housing payments that exceed 25% of income to be unaffordable.

“Monthly mortgage payments have soared compared to last year, and rising home prices are not helping affordability conditions,” Michael Hyman, a research data specialist at NAR, notes on the association’s Economists’ Outlook blog. “One good sign for the housing market is a welcome increase in the supply of inventory. Another is that rates recently have cooled, slowing the pace of growing monthly mortgage payments.”

Housing affordability posted double-digit declines in June compared to a year ago in all four major regions of the U.S. The Midwest was the most affordable region, with a median household income of $90,650 but a qualifying income of $68,496 needed to buy a median-priced home in the area.

On the other hand, the least affordable region continues to be the West, where the median family income was $98,498 but a qualifying income of $141,552 was needed to purchase a median-priced home. It’s the fourth consecutive month the Western region posted a reading on NAR’s affordability index below 100, which means a family earning the median income in the region can’t afford a median-priced home.

Source: National Association of Realtors® (NAR)

© 2022 Florida Realtors®

New list ranks Florida as best state for retirement, Alaska as worst

 By KIMBERLY BONVISSUTO

Senior living companies operating in Florida may be buoyed by Bankrate’s new rankings of the best and worst states for retirement in 2022.

After crunching statistics on cost of living, public health and other metrics, the website named the Sunshine State tops, followed by another southern state and three states in the Midwest. The analysis also looked at wellness, culture, weather and crime.

Florida, with the second-largest share of adults aged 65 and older among all 50 states, led the ranking categories of culture and diversity. The state also boasts racial diversity and a significant LGBTQ population, according to Bankrate. The high incidence of hurricanes and tornadoes hurt the state’s weather ranking (No 5), however. 

Affordability, once a major selling point for the state, is fading as the cost of living rises, Bankrate said. Florida ranked No. 18 on the site’s affordability index.

Next in line for the best retirement state was Georgia, which claims affordability as a major selling point. The state combines a low cost of living and a low tax burden to rank No. 7 in affordability, Bankrate said.

With an average annual temperature of 64 degrees, the Peach State is the fifth-warmest state in the nation. Although its tornado risk is average, its small coastline places it at risk for hurricanes, Bankrate noted.

The state’s weak spot was culture (No. 37), according to the rankings. Georgia has one of the nation’s lowest percentages of residents aged 65 and older, and it ranked near the bottom in arts and entertainment establishments. 

Midwest states rounded out the rest of the top five, with Michigan (No. 3 overall), which was tops for affordability in the nation due to a low cost of living and low tax burden; Ohio (No. 4 overall), which also scored well on affordability (No. 11); and Missouri (No. 5 overall), where affordability (No. 3) and a moderate climate (No. 19) won points. 

States landing in the bottom five were Alaska (No. 50 overall), Maine (49), California (48), New Mexico (47) and Montana (46). Alaska ranked No. 48 in the subcategory of weather and No. 49 for crime. Maine ranked dead last for weather. California ranked No. 49 for affordability, whereas New Mexico ranked last for crime and No. 45 for well-being. Montana ranked No 47 for weather.

More Florida Buyers Back Out of Contracts in July

 By Kerry Smith

About 16.1% of U.S. home contracts fell through in July, up from 15% in June and 12.5% a year earlier. Of the top 10 city backout rates, 6 were in Fla., with Jacksonville No. 1.

SEATTLE – Nationwide, roughly 63,000 home-purchase agreements fell through in July, or 16.1% of homes that went under contract that month, according to a report from Redfin. It’s up from a revised rate of 15% one month earlier and 12.5% year-to-year.

An increase in backouts can reflect a changing market. Some buyers who started their search a few months ago may no longer qualify for a mortgage high enough to cover their purchase. Some frustrated buyers may have made a quick decision and then regretted it as more listings come into the market. And some buyers may feel they’ve gained more power after a seller refused to negotiate requested changes.

Florida is home to many of the cities seeing buyers back out, holding six of the top 10 spots in Redfin’s study. Jacksonville held down the No. 1 spot, with buyers backing out of just less than a third (29.3%) of all contracts.

Top U.S. cities where buyers backed out

1. Jacksonville – 29.3% of homes under contract
2. Las Vegas – 27.4%
3. Lakeland – 26.2%
4. New Orleans – 25.9%
5. San Antonio – 25%
6. Orlando – 24.5%
7. Palm Bay – 24.5%
8. Deltona – 24%
9. Atlanta – 23.7%

“Homes are sitting on the market longer now, so buyers realize they have more options and more room to negotiate. They’re asking for repairs, concessions and contingencies, and if sellers say no, they’re backing out and moving on because they’re confident they can find something better,” says Heather Kruayai, a Redfin real estate agent in Jacksonville. “Buyers are also skittish because they’re afraid a potential recession could cause home prices to drop. They don’t want to end up in a situation where they purchase a home and it’s worth $200,000 less in two years, so some are opting to wait in hopes of buying when prices are lower.”

Alexis Malin, another Redfin agent in Jacksonville, warns buyers that there’s no guarantee they’ll be able to find better deals in the future. Annual home-price growth has started to slow – to 8% today from 17% a year ago – but prices are still on the rise and Redfin economists don’t expect them to crash.

“Some buyers who are backing out of deals have this mindset that the market is crashing and they’ll be able to get a home for $100,000 less in six months. That’s not necessarily the case,” she said. “Homes in many parts of Florida are still selling for a pretty penny, so I warn my buyers that the grass might not actually be greener on the other side.”

Some buyers may also be backing out due to 5%-plus mortgage rates. Those who started their search months ago, when rates were closer to 3%, may be realizing the type of home they wanted before is now out of budget since monthly mortgage payments have soared nearly 40% year over year.

“Home-purchase cancellations may begin to taper off as sellers get used to a slower-paced market,” says Redfin Deputy Chief Economist Taylor Marr. “Sellers have already begun to lower their prices after putting their homes on the market. They’ll likely start pricing their properties lower from the get-go and become increasingly open to negotiations.”

“The last four buyers I’ve worked with have all backed out of deals,” Malin said. “One of my clients asked the seller for money to cover the home being repainted. The seller said no at first, so my buyer canceled the contract, but the seller then changed their mind and repainted the whole house. My buyer still walked away because he decided he didn’t love the home that much after all and he knew he had other options.”

© 2022 Florida Realtors®

Study: Climate Change Has Little Impact on Sales

 By Kerry Smith

While no one wants a life in a high-risk area, buyers generally ignore philosophical dangers and continue to pay a premium for properties in fire or flood zones.

SEATTLE – Homebuyers paid a premium for high-fire-risk and high-flood-risk homes during the pandemic, according to research from Redfin. Even as climate-change gains a higher profile, more people have moved into climate-risky areas than out of them in recent years.

The 50 U.S. counties with the largest percentage of homes facing high fire and flood risk saw their populations increase by an average of 3% and 1.9%, respectively, from 2016 through 2020, due to positive net migration.

In addition, second-home purchases with high flood, storm and/or heat risk surged roughly 40% over the past two years.

Part of the reason may be perceptions if climate change is viewed as a global problem that will exist in any location. The survey found that 63% of people who moved during the pandemic believed climate change is, or will be, an issue in the place where they now live.

“From devastating floods in Kentucky and Missouri to deadly fires in California and brutal heat waves across the U.S., it’s clear that natural disasters are intensifying. Still, people are moving into risky areas,” said Redfin Chief Economist Daryl Fairweather. “When people decide where to live, they consider a whole host of things ahead of climate change, which has potential implications on their safety, home stability and finances.”

Homes in high-risk vs. low-risk areas

The median sale price of U.S. homes with high fire risk was $550,500 in April 2022, compared with $431,300 for homes with low fire risk. In other words, the typical home with high fire risk sold for $119,200 (27.6%) more than the typical home with low fire risk – the largest premium in dollar terms since at least 2017.

Places like suburbia – which faces a greater first risk than downtown city locations – saw a surge in homebuyer demand over the last two years, causing prices to jump.

Similarly, the median sale price of homes with high flood risk was $402,010 in the first quarter of 2021, compared with $353,783 for homes with low flood risk. That means high-risk homes sold for a record 13.6% premium – up from a premium of 10.1% in the first quarter of 2020.

© 2022 Florida Realtors®

Florida Town Considers End to Single-Family Zoning

 By John Henderson

Is single-family zoning good or bad? It’s a hot issue, but affordable-housing advocates say it’s one of the problems, and Gainesville might nix it altogether.

GAINESVILLE, Fla. – A split vote during the Gainesville City Commission meeting on Thursday has put the city on pace to become the first in the state to eliminate single-family zoning. It was the first of two needed votes that came in around midnight after a crowd of nearly 100 people showed up to oppose the zoning change, while only about a dozen supported it.

The 4-3 vote calls for small-scale, multi-family housing throughout the city, affecting up to 63% of Gainesville’s residential properties. The proposal replaces the single-family exclusionary zoning with a new “neighborhood residential” category that would allow residential structures of up to four units per parcel depending on the size of the lot.

Buildings can’t be more than two stories tall.

The motion to approve the change included a recommendation by commissioner Reina Saco that staff come back with the pros and cons of sunsetting the laws in three to five years to give the city time to study how the zoning change works in the real world.

A vote to postpone the vote until after the Nov. 8 election failed.

“My concern has been that we don’t have data,” said city commissioner Desmon Duncan-Walker, who proposed the delay. “My bigger concern is that we don’t have the will of the people. And I think we need that.”

Saco, Mayor Lauren Poe, and commissioners Adrian Hayes-Santos and David Arreola voted in support of the first of two required votes on the zoning and plan change. Commissioners Cynthia Chestnut, Duncan-Walker and Harvey Ward voted in dissent.

“The best time to plant a tree is 20 years ago,” Poe said. “The second best time to plant a tree is today. The same is true for housing. The best time to build adequate housing, and abundant housing, was 20 years ago. The second best time is today.”

Poe said he wants people to be able to choose where they want to live and not be forced out of their neighborhoods. But he added that when there is a shortage of homes, wealthy people will gobble up those in more desirable neighborhoods.

“That is how displacement and gentrification works in every single city and town. It’s not unique to Gainesville,” he said.

The emotionally charged meeting at the packed City Hall lasted more than six and a half hours, with a crowd flowing into a conference room and out into the parking lot, where some elderly people complained about standing for hours in 90-degree heat.

Commissioners who support the zoning and plan change have said that allowing the slight increase in density in single-family neighborhoods could create more housing units and help with the affordable housing problem over time. They attribute the origins of the city’s zoning laws to racist policies set during the desegregation era.

But the vast majority of Black people who have spoken out are opposed to eliminating exclusionary zoning. Commissioner Chestnut said the situation was odd and had emboldened Gainesville’s Black community like never before.

“I have never in my life been in a situation where you have white people calling an issue ‘racist,’ and Black people saying, ‘No, it’s not racist,’” said Chestnut, adding that the issue should not be about race.

But some historically Black neighborhoods, like Porters and Fifth Avenue, won’t be directly affected by the zoning change, as those areas already allow multi-family units. If anything, some argue, the zoning change would alleviate pressure in neighborhoods by expanding similar multi-family homes around town, mostly in the northwest part of the city.

Pushback from community leaders

Local state legislators are trying to get the plan change held up at the state level.

State Rep. Chuck Clemons, R-Newberry, and Sen. Keith Perry, R-Gainesville, recently sent a letter to the Florida Department of Economic Opportunity, asking it to intervene and hold up the process until the Legislature meets next spring to possibly address the issue. That agency is now the one that must sign off on the comprehensive plan.

The commission made the decision over not only residents’ objections, but all of its advisory boards.

Earlier this week, the Alachua County Commission voted to recommend that the city not approve the change. The city’s Affordable Housing Advisory Committee on July 12 unanimously urged the commission not to move ahead with the zoning change. And the city’s Plan Board was not opposed to the new multi-family zoning category but recommended it not be implemented citywide.

Community feedback

Several speakers urged the commission to put the proposal on a ballot for voters to decide. Petitions were presented with more than a thousand signatures of residents opposed to the change.

Harry Shaw, a Suburban Heights resident, said the rezoning is “unproven radicalness,” adding that it would result in a “costly ill-conceived boondoggle for Gainesville” but a windfall for developers.

Some residents also said they fear allowing multi-family units in single-family neighborhoods would lower property values and encourage student rentals that are not affordable. They said the multi-family units would result in more noise and parking issues.

Several UF students were among those in the minority who urged the commission to get rid of the exclusionary single-family zoning, saying it is keeping home prices high.

“This is just allowing people the flexibility to build housing that meets their needs,” Joshua Ney said.

It’s not over

The vote does not mean the changes are law yet. It was the first of two required votes. In between each, the plan must also be approved by the state Department of Economic Opportunity.

Ward said he believes the plan will get held up for a while there, calling it “uncharted territory.”

Chestnut agreed on Friday, saying it could be delayed until new elected leaders take office in January.

If that happens, the plan and zoning change would not likely happen, she said, noting that one speaker polled commissioner candidates who overwhelmingly said they would attempt to reverse the change.

The state agency has 30 days to respond to the city’s proposed land plan change.

“They could ask for more time,” Chestnut said. “I think they could take a number of approaches … They could say, ‘You need to have more public input,’ which I fully expect them to say. And I think another very, very powerful piece here is the Black community. With the Black community unanimously saying ‘no,’ I don’t think the state is going to ignore that.”

GNVoices President Casey Fitzgerald, who heads the organization fighting the plan and zoning change, said they will first contact the state agency and point out that the city has not done enough studies to justify the plan change, which is required by law. He said this could hold the case up until the next commission is seated after January, which would likely mean the zoning and plan proposal would die.

If the state agency approves the plan, then GNVoices will file an administrative appeal to the state’s decision to allow the plan change, he said.

Copyright © 2022, Gainesville Guardian, all rights reserved.

NAHB: Affordability at Lowest Point Since Recession

 By Kerry Smith

Only 42.8% of Americans with a median income could afford a median-priced home in the second quarter of 2022 – a sharp drop from 56.9% in the first quarter.

WASHINGTON – In the second quarter of 2022 (2Q), rising mortgage rates, high inflation, low inventory and higher home prices pushed housing affordability to its lowest point since the Great Recession.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), just 42.8% of new and existing U.S. homes sold between the beginning of April and end of June were affordable for families earning the U.S. median income of $90,000 – a sharp drop from the 56.9% of homes sold in the first quarter.

“Rising housing costs stemming from increased interest rates, supply chain disruptions … and a persistent lack of construction workers are dramatically affecting home prices,” says NAHB Chairman Jerry Konter. “Taming housing costs will ultimately require building more homes, and it will be easier to increase production in more affordable smaller and mid-sized markets.”

“Declining affordability has also pushed builder sentiment down for seven consecutive months and NAHB is projecting a net decline for single-family construction in 2022 as the housing markets slows due to ongoing affordability issues stemming largely from supply side challenges,” said NAHB Chief Economist Robert Dietz.

According to the HOI, the national median home price jumped to an all-time high of $390,000 in the second quarter, surpassing the previous record-high of $365,000 set in the first quarter.

Meanwhile, average mortgage rates soared by 1.47 basis points in the second quarter to 5.33% from an average rate of 3.86% in the first quarter – the largest quarterly mortgage rate jump in the history of the HOI series, which dates back to 2012.

In the nation’s most affordable housing market with a population of at least 500,000, Lansing-East Lansing, Michigan, 85.2% of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $89,500.

Elmira, N.Y., was the nation’s most affordable small market. In Elmira, 91.8% of homes sold in 2Q were affordable for families earning the median income of $77,900.

For the seventh straight quarter, all top five least-affordable housing markets – major and smaller – are in California.  Los Angeles-Long Beach-Glendale, California was the nation’s least affordable major housing market: Only 3.6% of homes sold during 2Q were affordable to families earning the area’s median income of $90,100.

Salinas, California led the list of unaffordable small markets, with only 5.3% of new and existing homes sold in 2Q affordable to families earning the area’s median income of $90,100.

Most affordable housing markets

Top five affordable major housing markets

1. Lansing-East Lansing, Michigan
2. Indianapolis-Carmel-Anderson, Indiana
3. Toledo, Ohio
4. Harrisburg- Carlisle, Pennsylvania
5. Scranton-Wilkes-Barre, Pennsylvania

Top five affordable small housing markets

1. Elmira, New York
2. Cumberland, Maryland-West Virginia
3. Wheeling, W.Va.-Ohio
4. Utica-Rome, New York
5. Davenport-Moline-Rock Island, Iowa-Illinois

Least affordable major housing markets

1. Los Angeles-Long Beach-Glendale
2. Anaheim-Santa Ana-Irvine
3. San Diego-Chula Vista-Carlsbad
4. San Francisco-San Mateo-Redwood City
5. San Jose-Sunnyvale-Santa Clara

Least affordable small housing markets (all California)

1. Salinas
2. Napa
3. San Luis Obispo-Paso Robles
4. Santa Cruz-Watsonville
5. Santa Maria-Santa Barbara

© 2022 Florida Realtors®

Florida’s Insurer-of-Last-Resort Now Has Over a Million Policies

Citizens Property Insurance Corp. hasn’t had 1M policies since 2014, and the latest surge comes despite strong efforts to lower Florida’s potential liability.

TALLAHASSEE, Fla. – The state-backed Citizens Property Insurance Corp. has surpassed 1 million policies for the first time since 2014.

Created as an insurer of last resort, Citizens has been absorbing a flood of policies as private insurers drop customers and push for large rate increases because of financial losses. The Citizens website on Thursday showed it had 1,000,624 policies as of Aug. 5, up from 937,835 policies on July 8.

Citizens President and CEO Barry Gilway said the insurer could reach 1.2 million policies by the end of the year since many private companies are not writing coverage.

“The market is probably 75% shut down,” Gilway told the Citizens Board of Governors on July 13. “(There are) very, very few companies that are really open in the marketplace.”

Citizens had 883,333 policies at the end of May. As longer-term illustrations of the growth, Citizens had 661,150 policies on June 31, 2021, and 486,773 policies on July 31, 2020, according to data on its website.

State leaders have long sought to limit the size of Citizens because of potential financial risks if Florida is hit by major hurricanes. If Citizens does not have enough money to pay claims after a disaster, it can collect additional money from policyholders throughout the state – a process known as collecting assessments.

“Citizens Insurance topping the 1 million policy mark signals a market that is teetering, putting millions of Floridians and local businesses at risk of even higher costs in the form of hurricane taxes,” Florida Chamber of Commerce President and CEO Mark Wilson said in a statement Thursday, likening assessments to taxes.

Gov. Ron DeSantis called a special legislative session in May to address the property-insurance system, but problems have persisted since changes take time to impact the market. In all, five private insurers have been declared insolvent since February, with Weston Property and Casualty Insurance the latest to be placed into receivership.

The last time Citizens topped 1 million policies occurred after the 2004-2005 hurricane seasons, in which seven storms made landfall in Florida. But Citizens hasn’t had over 1 million policies since February 2014.

© 2022 The News Service of Florida. All rights reserved.

NAR’s Yun: Any Economic Downturn Likely Mild By Catherine Mesick

 The chief economist pointed to signs of a recession – and signs that suggest no recession. At the least, he says, the latter should block a major economic slowdown.

WASHINGTON – The country isn’t officially in a recession yet, despite two consecutive quarters of national contraction of the gross domestic product, a commonly cited indicator of an economic downturn, says Lawrence Yun, chief economist for the National Association of Realtors® (NAR). And even if the nation is facing an official recession, several healthy economic trends – including a robust job market, coupled with new efforts to boost affordable housing – could stave off a more serious slump.

New guidance from the Treasury enables state and local governments to use leftover emergency funding from the American Rescue Plan to create affordable housing. Yun says that should help ease the inventory crisis and counteract the effects of a tightening economy.

Still, there are questions about U.S. “stagflation,” a period of high inflation combined with an economic slowdown. But the National Bureau of Economic Research – the council that watches over U.S. business cycles – still hasn’t declared an official recession, Yun notes.

Major factors counteracting current slowdown conditions

1. Job creation is robust. Total payroll jobs were over 150 million in early 2020 before the onset of the pandemic, Yun said at NAR’s Real Estate Forecast Summit last week. While COVID-19 shutdowns precipitated a steep decline in jobs, each month showed strong job creation after the restrictions were lifted. Though there is variation across the country, Yun says, the job market has largely recovered.
   
   “We are essentially at the same level of jobs and W-2 employment now compared to pre-COVID days,” he said. Data from the Bureau of Labor Statistics shows that right now, there are more job openings than unemployed people. As of June, there were 5.9 million workers searching for jobs and over 10 million job openings. So, while high unemployment typically characterizes a recession, “the ratio [today] is almost two to one,” Yun said.
   
   “It’s a very unusual recession – if we are in one.”

2. Commercial real estate is growing. Though a recession typically means bad news for commercial properties, the commercial market as a whole is flourishing despite a stagnant office sector, Yun writes in a recent Realtor Magazine column. Rental demand is booming, and rents are up significantly. Demand for warehouse space has surged as retailers stock up to avoid supply chain disruptions. Hotel bookings, air travel and park attendance are now above pre-pandemic levels. All of this increased activity has led to high demand for new commercial construction.
   
   “The improving construction sector means that any recession will be mild,” Yun said.

Despite the positive economic signs, falling homes sales remain a concern.

“Home sales are down largely because mortgage rates have risen sharply,” Yun said at last week’s event. “If interest rates rise further, then home sales will decline even more – even if there is no recession.”

One long-term solution is to increase housing supply, which is why the Treasury’s announcement is meaningful. The change in American Rescue Plan guidance could mean significantly more funds going to housing supply and a reduction in costs for buyers over time.

Another factor that will help in the short term is employers finding a way to match workers to openings and fill jobs, Yun said. “We still need workers. In an environment with rising mortgage rates, what will drive homes sales is jobs.”

Source: National Association of Realtors® (NAR)

© 2022 Florida Realtors®

Fannie Mae: Buyers Wary of the Housing Market

 By Kerry Smith

Buyers’ feelings about the current market hit a low not seen since 2011. Only 17% think it’s a good time to buy a home, and the “good time to sell” index also dropped.

WASHINGTON – Consumers don’t have a good feeling about the current market.

The Fannie Mae Home Purchase Sentiment Index (HPSI) decreased 2.0 points in July to 62.8, its lowest level since 2011 and well below the all-time high set in 2019.

Only 17% of respondents say it’s a good time to buy a home, and the percentage of who believe it’s a good time to sell has also been ticking downward. In July it fell to 67% from a 76% reading in May.

Overall, four of the index’s six components decreased month over month, including the component associated with home price growth expectations, which has fallen meaningfully over the past few months though remains positive. Year over year, the full index is down 13.0 points.

“The HPSI has declined steadily for much of the year, as higher mortgage rates continue to take a toll on housing affordability,” says Doug Duncan, Fannie Mae senior vice president and chief economist. “Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it’s a bad time to buy, as well as sell, a home.

“Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision believing that home prices may drop. Overall, this month’s HPSI results appear to confirm our forecast for moderating home sales over the coming year.”

© 2022 Florida Realtors®