Author Topic: Interesting article about a pending housing/insurance/finance crash  (Read 1257 times)

dividendman

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https://www.bloomberg.com/news/features/2017-04-19/the-nightmare-scenario-for-florida-s-coastal-homeowners

TL;DR - Coastal regions in Florida are already being impacted by the sea level rising. This is causing a vicious cycle of people wanting to be the first seller even though the sea level hasn't gone up so much to put their home at risk. This causes more to sell. Eventually the defaults on mortgages, etc. will cause banks to fail and ripple throughout the system.

The article claims this is worse than the great recession because there is no chance of the property value recovering (the property is slowly going away).

maizeman

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Re: Interesting article about a pending housing/insurance/finance crash
« Reply #1 on: April 21, 2017, 08:13:12 PM »
I didn't realize just how far along things were in Florida already.

Quote
A few months after Russo, a partner at a law firm in Miami, moved to Key Largo in 2015, the big fall tides brought 18 inches of water onto the road in front of their house. Unlike previous tidal floods, this one lasted 34 days....

Realtors in Florida face no legal requirement to warn potential buyers about those flood risks. ...

ďAnybody in these floody areas, if they disclose to a buyer, the buyer probably wonít buy that property,Ē said Slap, whose company is doing work for the city of Miami Beach. ďThatís going to drive the value down to zero, well before water is up to their front door.Ē

Reminds me very much of the ethical dilemma presented in "Margin Call." If you realize something that cost you a lot of money is actually worthless, but everyone else still thinks it is worth a lot of money, do you just sell it on so someone else is left holding the bag when the truth comes out?

On a nationwide scale this doesn't sound as serious as the housing crisis. Housing crash supposedly wiped out about $6 trillion in home values, while this article says there are ~$0.4 trillion in homes at risk from rising sea levels. But these loses would obviously be much more concentrated in a few parts of the country.  I'm just glad I don't own property near the coasts or live in a state whose tax base depends on the value of all the coastal real estate.
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ChpBstrd

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Re: Interesting article about a pending housing/insurance/finance crash
« Reply #2 on: April 22, 2017, 06:52:59 AM »
One might think Floridians would be building their houses exclusively out of concrete by now, instead of hurricane-vulnerable sticks. Yet, people keep lapping up houses in new stick-house developments, and paying more for insurance than the mortgage. Your average buyer cares more about granite countertops than elevation or hurricane survivability. Similarly, your average car buyer cares more about luxury than cost. The cost/reward economics of cable TV should have long ago wiped out that industry. American middle-class households routinely spend more on decor than their grandparents ever owned. The capacity of people to economically destroy themselves for the sake of luxury has no limit.

None of these buildings is expected to outlive a 30 year mortgage. New beachfront properties a few decades from now might have a view of offshore rock piles that used to be buildings, bridges, and roads, extending for miles. The yachts will follow a channel through what used to be a city. All this will be as normal as it is today.

Also, we'll all pay for it. Your federal taxes will be used to raise roads, rebuild bridges, replace utilities, and buy out homeowners with sob stories. The luxury cycle must keep going. The economy depends on it, they'll tell us.

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Grogounet

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Re: Interesting article about a pending housing/insurance/finance crash
« Reply #3 on: April 23, 2017, 04:00:17 AM »
This is not Florida unfortunately, this is everywhere around the world.
Most metro cities have been built according to their proximity to the sea as boat was the main transportation for goods before plane.
As sea level rises, it is just mathematical effect that some houses and entire suburbs will disappear.

Re-investment though. Proximity to sea/coast has always been almost guarantee LT returns (Capital wise). I guess one will have to figure out the area the least impacted!

seattlecyclone

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Re: Interesting article about a pending housing/insurance/finance crash
« Reply #4 on: April 23, 2017, 11:04:47 AM »
I'm not too worried about dense city centers. The real estate there is concentrated and valuable enough to make seawalls and stuff worth the cost. Not so much in suburban housing developments.
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maizeman

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Re: Interesting article about a pending housing/insurance/finance crash
« Reply #5 on: April 23, 2017, 11:48:52 AM »
This is not Florida unfortunately, this is everywhere around the world.
Most metro cities have been built according to their proximity to the sea as boat was the main transportation for goods before plane.
As sea level rises, it is just mathematical effect that some houses and entire suburbs will disappear.

Re-investment though. Proximity to sea/coast has always been almost guarantee LT returns (Capital wise). I guess one will have to figure out the area the least impacted!

In different areas elevation rises at different rates as you travel away from the coastline. California would lose a lot less land to a 1 ft rise in sea levels than Florida for obvious reasons:



Bangladesh has only 360 miles of coastline, but they're going to be in much more trouble as sea levels rise than Chile (4,000 miles of coastline). So it's not as simple as saying everyone within X miles of the ocean is going to have problems.

Different folks have estimated that this different ways since there are issues with the accuracy of elevation and population and range of tides around average sea level, but it seems likely that somewhere between 2-10% of world population lives close enough to sea level that they're at risk from rising oceans.* Which is still a LOT of people. Just not most.

Here's a cool map of how that plays out along the US east coast: http://www.preventionweb.net/files/7701_USA10mLECZandpopulationdensity1.pdf

*https://www.quora.com/What-percentage-of-the-worlds-population-lives-less-than-a-meter-above-sea-level
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PizzaSteve

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Re: Interesting article about a pending housing/insurance/finance crash
« Reply #6 on: April 23, 2017, 12:27:26 PM »
We regularly see local stories about cliff side homes getting condemmed.  Cities usually seem to buy them to bail out homeowners staying as a more expensive public safety risk.  Doesnt seem likely to scale well though for many units.

One example.
http://www.dailymail.co.uk/news/article-3417401/Dramatic-drone-footage-shows-oceanside-homes-teetering-edge-California-cliffs-crumble-El-Nino-storms.html

PS swearing off mortgage threads.  Facepunch me if i reply to boarder42
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bacchi

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Re: Interesting article about a pending housing/insurance/finance crash
« Reply #7 on: April 23, 2017, 12:58:46 PM »
We regularly see local stories about cliff side homes getting condemmed.  Cities usually seem to buy them to bail out homeowners staying as a more expensive public safety risk.  Doesnt seem likely to scale well though for many units.

Yeah, someone is going to be left holding the bag. Obama set aside millions to move a sinking town in Louisiana but there are a few towns in Alaska that need money to move, too. Those town and homeowner numbers will increase dramatically within our lifetime.

But, hey, there'll be strong demand for civil engineers.