My dad bought a retirement house in Florida in January 2007 (age 57) for about 556K and sold it for about 431K in January 2016. My dad was planning on retiring in September 2011 (age 62) but they bought 4 years earlier due to FOMO. Because of the run-up in prices (2003-2006), they felt like they wouldn't be able to afford a retirement house in Florida if they wanted until 2011. In reality, if they waited until 2011, they could have got the same house for 350K.
New house was purchased in June 2014 for about 288K. It was a foreclosure that was on the market for a long time because it's a very low elevation lot near a river and canal with required flood insurance. The FEMA flood insurance program was constantly on the news around that time because the federal government said that they are going to start to pull back on funding for flood insurance. FEMA told everyone that flood insurance is going to increase a little each year for the next 10 years. From my dad's perspective he was getting a deal because the house was in bad shape. From my perspective, he was ignoring the cost of flood insurance, which is a big reason why the purchase price was lower than comps in the area.
I explained to my father he should probably consider the cost of flood/home insurance into his calculations if this is going to be his forever home when he bought it in 2014, two months before his 65th birthday. He scoffed and said based on the lower price point of 287K that insurance doesn't matter. I explained to him that a mortgage can be paid off, but the cost of insurance will be forever and flood insurance is pretty much guaranteed to increase based on what the government is saying in 2014.
In 2020, I started to hear some unprovoked grumblings regarding the increased cost of the flood insurance. However, those grumblings were eventually evaporated by the hot real estate market. The neighbors next door sold their house for 630K in February 2022, so they immediately claimed their house is worth 800K because their house and property is larger. However, their neighbors house had much better upgrades. They gutted the house and re-did it. Their house was also 2-3 ft. higher and does not require flood insurance. In reality, at the peak, my parents house was worth 600K to 650K, in my opinion.
Post hurricane, their new combined flood insurance/home insurance is $950/month, so total PITI is around $2425/month.
My dad told me 3 days ago that they can't afford their new payment due to the higher insurance cost and will be putting the house on the market when it's complete.
Median house price for the area is 400K. Because they don't have enough equity to buy something in cash they are now going to be subject to the higher interest rates and getting a new 30-year mortgage at the age of 74 years old. I'm interested to see what happens with their next purchase. Will they buy something reasonable in their budget or stretch themselves to the max? Time will tell.
Total income for them is around 90K/year, so they are not going to starve.
