Insurers Are Deserting Homeowners as Climate Shocks Worsen

https://consumerwatchdog.org/insurance/top-10-us-insurance-c...

If someone moves from Florida to Georgia, or California to Colorado, then the former state loses their tax base (even in FL: sales/corporate tax).

So it sets up a musical chairs scenario where the state in question has every incentive to keep the game going.

Which will ultimately mean (a) using state revenue to balance out insurance plans and/or (b) outright fraud and shifting the risk burden onto someone else (looking at you and Fannie/Freddie, Florida).

Plano, TX.

On the legislation front, a series of court cases and legislation combined with weak oversight meant that something like 70% of the nation's roof insurance claims were in Florida. There was clear fraud in many cases. Because of this legislation was introduced that made it difficult for any homeowner to file a legitimate claim. Combine this with under-capitalization by insurers and weak oversight and it's just a mess.

But the big one is housing. It's too expensive. And this is another inevitable consequence. It used to be that housing depreciated. That no longer seems to be the case. The replacement value is only going up. This is the foreseeable outcome of years of government policy designed to increase home values.

Ultimately we need to stop treating housing as an investment, as your retirement nest egg. All this does is steal from the next generation. That's it. Withholding shelter (ie housing) either by limiting supply through regulation and legislation or simply by pricing people out is state violence.

Housing prices need to come down. Hoarding housing needs to be massively disincentivized. We need to stop giving massive tax breaks to homeowners. None of this is popular but without major reform we're headed down a bad road.

Canada is heading towards crisis at the moment and many of its problems can be tied directly back to soaring house prices.

The consequences of high house prices are everywhere too. More expensive commercial real estate means businesses need to recoup that cost through higher prices.

Houses can't become a "cheap commodity" unless there are revolutionary new construction methods and/or alternative materials. E.g. something like cheap 3D printing of structural walls, ubiquitous robots, pre-fab modular rooms and roofs, etc and cheaper material alternatives to wood, concrete, tile, asphalt shingles.

Without a technological leap, traditional construction techniques will always have the baseline costs of paying expensive humans to rebuild the property. The labor costs of carpenters, plumbers, electricians, HVAC installers, roofers is ~50% or more of a house construction budget.

This means houses will always be "expensive" in relation to the average Starbuck's barista paycheck because of Baumol's "Cost Disease": https://en.wikipedia.org/wiki/Baumol_effect

Put another way, we've known for several hundred years in math that the derivative of x^2 is 2x. Disseminating that knowledge should be cheap. And yet the cost(salaries) of calculus teachers and math professors (and the associated textbooks) keep going up instead of down. That's the "cost disease" similar with building houses.

That's why a bunch of insurers abandoning the market doesn't won't change the economics enough for houses to become cheap commodities. Houses prices may adjust with lower sales prices but it still won't drop to "cheap commodities" level pricing. e.g. Florida condos' prices drastically fall because the Surfside collapse triggers law requiring millions in maintenance and rising hurricane insurance rates ... Starbucks baristas still can't afford those discounted condos.

However, to your point about "market forces" creating a new equilibrium in prices... you can buy houses in Detroit for $1 but that does come with other issues:

https://old.reddit.com/r/explainlikeimfive/comments/1ja3lm/e...

https://www.quora.com/Is-there-a-catch-to-buying-the-1-homes...