First Alert Weather Alert: Flood Warning expires at 8:00 PM on 4/28, issued at 10:03 AM Bryceville, FL | Callahan, FL | Fernandina Beach, FL | Glen Saint Mary, FL

Flood premiums threaten Florida's housing market

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Updated: 10/23/2013 11:59 pm
ST. AUGUSTINE, Fla. -- After years of devastation, the housing market in St. Johns County is booming once again.

"Things in this market are wonderful right now," said Watson Real Estate Sales Associate Stella Alexander.

So Alexander was surprised when late last month her clients were forced to walk away from their dream home near the Intracoastal after the owners handed over their existing flood insurance policy.

"That insurance was around $1,300 or so, and the buyers were good with that."

By Oct. 1, that number had drastically changed, however. New FEMA flood maps took effect, adding 2 million Florida homes to high risk zones, including more than 1,200 in St. Johns County.

As a result, premiums skyrocketed, and Alexander's clients were shocked by the new rate.

"The $3,500 policy did not go in with their plans so they had to cancel the contract."

Brightway Insurance Agent Matt Carlucci said the rising cost is a growing concern in the real estate market.

"That's one more expense that the buyer is going to have."

Everyday he receives calls from agents like Alexander, who are concerned that the homes they're trying to buy and sell have been affected.

"We assume that it's at the beach and the coastal areas but not always," said Alexander. "It's too hard to know anymore."

"Before my answer was almost always, no. I wouldn't even have to look it up because I just knew. Now, I'm finding a lot more of these homes are in a flood zone," said Carlucci.

Real estate analysts predict rising insurance rates could eventually cripple Florida's recovering market, leading to more lost sales and foreclosures in the coming year.

Alexander and Carlucci said only time will tell how the market will be affected.

"FEMA’s probably not done redrawing the flood maps and we've probably only seen the beginning," says Carlucci, "but for now, I don't think homeowners or buyers should panic. FEMA could also reduce the zones in the future. In addition, homeowners can apply for a elevation certificate, and that could lower the rates nine out of 10 times."

According to RealtyTrac, one out of every 406 Florida homes are in foreclosure currently, which is the second highest rate in the country.
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