Florida real estate industry bracing itself for hurricanes pushing oil ashore
Florida property prices could take another hit if the hurricane season pushes oil from the BP Gulf of Mexico spill ashore, it is claimed.
The storm season could herald further real estate house price drops and it is those who are at risk from repossessions who will be hardest hit.
Mortgage borrowers in Florida who are already financially strapped will have limited ability to face additional challenges from the oil spill as negative equity and unemployment remain high, according to Fitch Ratings.
Half of all private label securitized mortgages in Florida are at least 60 days delinquent, the ratings agency said. Florida has a disproportionate share of non prime loans, with 85% of all loans categorized as Alt-A or subprime, Fitch added.
The substantial delinquency rate is due in part to the fact 81% of all loans in the state are underwater. Given the significant negative equity and unemployment level, ‘further economic stress brought on by the Gulf oil spill and declines in the tourism and fishing industries would be likely to further increase default rates,’ said Fitch managing director Roelof Slump.
There are concerns that should a hurricane push oiled water ashore it could completely de-value or in some cases destroy property values. BP is understood to be talking with some firms in the mortgage finance sector to gauge its potential financial exposure to oil damages to residential properties.
Getting house insurance in hurricane prone states can be expensive and choices of insurance can be limited, according to insurance company ratings service Weiss Ratings. Eight property insurers in each state control up to 77.2% of the market share.
Florida, however, has relatively more insurance providers to choose from, as the big eight companies control only 38.4% of the market share in the state.
‘After consecutive years of devastating storms across Florida, several insurers have entered the market, seeking to capitalize on shrinking capacity,’ said Melissa Gannon, vice president of Weiss Ratings, in a statement today.
‘But while the risk has now been spread among more players, the financial strength of the new entrants is questionable and consumers must monitor the health of the insurer they select, especially in light of the forecast for another active hurricane season,’ she added