Experts: Citizens Property Insurance increase will hurt home sales

Real estate agents and lenders alike say higher prices from Florida’s largest insurer could squeeze out buyers already experiencing sticker shock over the state’s insurance rates.

“It will have an impact,” said Peter Crowley, president and co-owner of Re/Max Alliance Group in Sarasota. “It will very much be driven on price ranges as far as what the tolerance level is for an increase like that.

“With moderately priced homes, this could impact somebody’s decision as to whether or not to move ahead with the transaction,” Crowley added.

That analysis comes as Citizens, the state-run insurer of last resort, approved new rates that will boost hurricane coverage premiums up to 26 percent in Sarasota County, and 22 percent in Manatee County, next year.

Citizens insures 90,000 customers in the two counties, many of them in waterfront houses or condominiums or in decades-old homes that other insurers will not touch anymore.

“The older houses with first-time or lower-income buyers have to have Citizens, and they can only afford a certain budget. This is going to affect them,” said Shannon Moore, of Green Lion Realty in North Port.

Homeowners without mortgages can always choose to go bare, or without hurricane coverage, and many owners say they are being forced to do so by inflated rates from Citizens and other insurers.

Moore, for instance, said she paid $15,000 cash for a 1950s block home that Citizens wanted $1,700 a year to insure, but only after the roof was replaced.

“So I dropped the whole darn thing,” she said.

The pending Citizens rate increase also follows similar jumps a few years ago, when homeowners insurance prices skyrocketed statewide after eight hurricanes pounded Florida in 2004 and 2005.

At the same time, Citizens’ coverage became critically important in the wake of the spate of storms, as large insurers like State Farm and Allstate stopped renewing hundreds of thousands of policies in Florida.

Laura Benson, president of the Sarasota Association of Realtors, said the Citizens rate increase could affect potential home buyers who are already tight on qualifying for financing.

“Any increase that goes into the mortgage payment would impact that, and could push them outside the qualification level,” she said.

Home buyers from other parts of the country often get hit with “sticker shock” when they learn the cost of insurance here, said Benson, who manages the Venice and Plantation offices of brokerage firm Michael Saunders & Co.

Realtors like Benson and Crowley stop short of saying the increase in Citizens’ rates could derail the region’s recovering real estate market, though.

“People recognize they are still getting good value today for their purchase,” he said.

Balancing out the premium increase, as well, are Florida’s lower property tax rates as compared with many states, and a lack of state income tax.

Experts say, too, that any increases by Citizens will be at least somewhat offset by record low mortgage interest rates.

Leslie Swart, managing partner at Sarasota’s Blue Skye Lending, said low interest rates do make higher insurance costs easier for buyers to absorb.

But even there, she notes, rates could push upward again to counter inflation fears or for other macroeconomic reasons.

“Once interest rates come back to where they should be, it could impact sales that much more,” she said.

The one group unlikely to be affected by Citizens’ plans are luxury homes buyers — many of whom have been buying with cash or cash equivalents. Unlike most buyers, they will likely not be discouraged by higher insurance costs, Crowley said.

Still, for the average home buyer, and those looking to acquire a multi-family unit or a home on the water, Citizens’ double-digit increase is expected, if nothing else, to generate some second guessing among buyers.

Swart noted that sales of waterfront condos, especially, might be affected by the rate increase, because Citizens now insurers a great number of those properties.

Condominium sales could be adversely affected, too. Financing on those units is often more difficult than with single-family homes, experts say, and because many units are empty and association dues have increased as a result, some buyers might balk at higher premiums.

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