How badly will escalating homeowner insurance premiums hurt?
Plenty. With rates roughly doubling in parts of Southwest Florida next year, some people will leave Florida, would-be homebuyers will lose the opportunity to own and outside companies will avoid the state altogether. And as those insurance costs spiral, expect some fallout to hit mortgage lenders, builders, real estate agents and anyone else associated with the housing industry.
Combined with rising energy prices, interest rates and increased home prices, higher insurance rates make for a perfect storm of negative movement in the region's economic well being.
Still, the short-term effects will not devastate the economy.
The recent whammy came in July when State Farm Florida Insurance boosted rates 52.4 percent, on average, across the state. But those numbers are far higher in coastal regions. For example, parts of Collier and Lee counties will see increases of 90-plus percent. Sections of Sarasota and Manatee counties that are close to the Gulf are looking at jumps of more than 100 percent, according to the Florida Office of Insurance Regulation.
Farther inland, rate increases will be slightly less-by 42.6 percent in Lee and 87.3 percent in Collier. In Manatee, the cost bumps up by 73.2 percent and in Sarasota by 79.1 percent. These figures do not include condo or rental structures.
The increases are, of course, the result of two consecutive years of heavy hurricane activity that resulted in more than $38 billion in damage statewide. State Farm ranks first in the number of policies in force across Florida and in Lee, Collier and Charlotte counties. In Sarasota and Manatee, the leader is Citizens Property Insurance, which also raised homeowners' rates by 13.3 percent in 2006 and 23.2 percent in 2005.
The Florida Legislature created Citizens in 2002 to cover policy holders in high-risk locations who are unable to afford coverage from traditional insurers. Deficit-ridden Citizens, which charges the highest premiums in the state, is being bailed out by the Legislature to the tune of roughly $1.7 billion.
Nationwide Insurance Company of Florida, another major carrier, has a 71.4 percent rate hike pending.
TIB Bank has noticed that some consumers are losing out on their chance for home ownership because they can't handle the cost. "We have heard of transactions that have not taken place because of the increases," says Mill Younkers, TIB's Southwest Florida president. "It disqualifies many people because it changes the ratio of income to debt." If we catch a break from the bad weather this year, the premium could drop, he adds.
But the finance industry is not taking the matter in stride. Recently a contingent of 15 Florida bankers traveled to Washington, D.C., to discuss the issue with elected officials. And at Fifth Third Bank, people with good credit may receive help regardless of debt ratio and other factors considered when obtaining a mortgage, says spokeswoman Jama Dock.
So far, the hikes have not been felt in the construction trade, but it's keeping a close watch, says Larry Anderson, executive vice president of the Home Builders Association of Sarasota County. "It can shoot a deal," he says. More worrisome is the possibility that homeowners insurance will become less available as carriers leave the state. "Government has to be aware overall of what [the increases are] doing to the market," he says.
Economist Hank Fishkind of Orlando-based Fishkind and Associates foresees another rate increase next year. That will result in people having to move from their homes. Just as disturbing, people and businesses who are considering a move to Southwest Florida might pass it over in favor of a state with lower insurance rates, he says.
"It's not going to be in great numbers, though," Fishkind says.-Phil Borchmann
State Farm Florida Insurance increased rates 52.4 percent across the state; along Sarasota and Manatee coastal areas, those rates jumped more than 100 percent.
Venice Chamber Hob Nob with elected officials and political candidates. 5:30 to 8 p.m. at the Venice Art Center, 326 Nokomis Ave. S., Venice. $15. Call 488-2236.
"Wake Up! Venice" breakfast meeting for the Venice Chamber. 7:45 a.m. at Sunset Lake Nursing and Rehabilitation Center, 832 Sunset Lake Blvd., Venice. Free. Call 488-2236.
Greater Sarasota Chamber U Executive Breakfast Series 8 a.m. at Michael's On East, 1212 East Ave. S., Sarasota. $30 in advance or $35 at door for members, $35 to $40 for nonmembers. Call 944-4031 or visit www.sarasotachamber.com.
Keep Manatee Beautiful Awards Program 11:30 a.m. to 1 p.m. at Tara Golf & Country Club Clubhouse, 6602 Drewry's Bluff, Bradenton. $10. Call 795-8272 or e-mail [email protected]
"Club 21" Leadership Sarasota County Celebrating the 21st anniversary of Leadership Sarasota County. 6 to 9 p.m. at Michael's On East, 1212 East Ave. S., Sarasota. No cost. Call 556-4027.
Excellence in Industry Awards 2006 A program of the Economic Development Corporation of Sarasota County. 11:30 a.m. to 1 p.m. at The Ritz-Carlton, Sarasota. Call 309-1200 ext. 203 for details.
Venice Chamber Business After Five Business card exchange and networking event. 5:30 p.m. at Waterford Companies, 333 S. Tamiami Trail, Suite 101, Venice. $4 for members, $8 for nonmembers. Call 488-2236.
MY FIRST JOB
Mary McCulley's days tending bar and betting on the dogs at the Sarasota Kennel Club launched her camera career.
Interviewed by Abby Weingarten
Photographer Mary McCulley has spent 25 years in the point-and-click world of fashion, food and special events. But before her prints made the covers of glamorous publications like SARASOTA Magazine, she paid her dues as a bartender at the Sarasota Kennel Club.
"I was at Ringling School, in my first summer semester, bartending at the Miss Whirl Restaurant at the dog track. I was just looking for a summer job, and quite honestly, I knew nothing of bartending. This was 1977. These days, I'm very much against live animal racing, so I kind of feel guilty about it.
"But when I was there, I started hanging out with the handicappers, the people who watch the dogs all the time and know how to predict the race. I met some of them, and they taught me how to handicap the races. They were a group of average, 30-something men. They were an odd collection of people who took their jobs very seriously. It was a funny place, full of people drinking pink squirrels and grasshoppers.
"They showed me how to read the program. One time, I won $700 on a daily double. So I went down to Wolf Camera and ended up buying my first camera, a Canon AE-1, and that was the beginning of my career.
"The next summer, I interned with Dick Dickinson as his assistant, and did a lot of darkroom work and photo jobs and played stylist. I got to be in a real professional photography environment before I got out of school. That was a key turning point to being in the real world. I graduated with a B.F.A. in graphic design and illustration and moved to New York City for seven years. I started my own business and then came back to Sarasota.
"I could look at it today, that if I ever can't be a photographer, I could go back to dog racing."
CRASH & BURN
U.S. and Sarasota-Manatee bankruptcies.
U.S. bankruptcy filings for year ending March 31, 2006: 1,794,795
U.S. bankruptcy filings for same period last year: 1,590,975
Percent change: 12.8% increase
YTD bankruptcy filings in Middle District of Florida* as of March 31, 2006: 2,960
Bankruptcy filings in Middle District of Florida for same period last year: 12,524
Percent change: 76% decrease
U.S. business bankruptcy filings for year ending March 31, 2006: 35,292
U.S. business filings for year ending March 31, 2005: 31,952
Percent change: 10.5% increase
Bankruptcies filed in 2005 in Middle District of Florida: 63,378
Middle District of Florida's national ranking in bankruptcy filings: No. 4
*U.S. Bankruptcy Court Middle District of Florida: Jacksonville, Orlando, Tampa areas, including Sarasota and Manatee counties
Note: The Bankruptcy Reform Act and its stricter rules went into effect Oct. 17, 2005; many people rushed to file to beat the deadline, which explains some of the decline this year.
Back to Basics
Toughen up, new Sarasota Association of Realtors CEO Kathy Roberts tells agents.
Interviewed by Abby Weingarten
In early February, 27-year industry veteran Kathy Roberts stepped in as the new CEO of the 4,500-member Sarasota Association of Realtors. Most recently she was chief operating officer for the Realtor Association of Greater Miami and the Beaches and also CEO of both the Topeka Board of Realtors and the Wichita Area Association of Realtors in Kansas.
What is your biggest role as CEO? One of my main focuses is to continue developing our relationship with the community. We want to participate in organizations that help to further the economic health of the community. A strong, vibrant community helps real estate. I also want to continue to provide services and business tools to our members.
What is your assessment of the local real estate market?
Our market is mirroring what is happening pretty much nationwide; it's stabilizing. We've had four or five years of exceptional sales and price appreciation, and now it's tapering off. Every five to seven years there will be an adjustment; it's always been that way.
Many people got their real estate licenses in the last two years, thinking it would be an easy way to make money. Will they last? The people who are long-term in real estate will adjust to the changes in the market. They know real estate is cyclical. Those who aren't may have a tough time. Agents will have to go back to basics and work the business. It won't just fall in their lap.
What are the major challenges now that the market has softened? I'm sure we'll lose some members-people who were trying to make quick money. Also, there will be challenges for homeowners. But if people price their property according to value and are realistic, they should still have no problem selling. There are still buyers coming into this market.
When do you think the market will pick back up? I think a speaker in one of our meetings-David Lereah, chief economist for the National Association of Realtors-put it pretty well. He said sellers are being stubborn and holding onto their prices, and buyers are being equally stubborn, thinking that the market is turning. Before the end of the year, the market will pick back up. He predicts 2006 will likely be the third best year for real estate nationally.
The Commercial Investment Division (CID) of the Sarasota Association of Realtors launched a new Web site for commercial realtors.
The site, www.suncoastcix.com, includes thousands of commercial listings for sale or lease through Southwest Florida that the public can view. Members of the CID will also be able to market their listings locally and nationally and provide a link to their own Web sites.