Hurricane Ian Impact on Future

[Jarrett Boyes]

We are in the process of trying to close on a property in Cape Coral and obviously have been put on pause with the hurricane.   What are the thoughts on how the area will be able to bounce back from a tourism standpoint?   My main concern with tourism is with the causeway to Sanibel Island being taken out and the access to those great beaches being gone.  This was an investment property for us so we are trying to understand what kind of hit we will take.  Also, thoughts on if insurance rates are going to hold or skyrocket?

[Jeff Copeland]

I live about two hours north of there, and I think the causeway is the major issue in the short term. Sanibel and Captiva are a big draw for tourists, and they will not be accessible by car for a long time (I'd have to guess at least a year to rebuild that infrastructure). 

My thoughts are that I would not buy now at pre-Hurricane Ian prices, but I would not abandon plans to invest in the market altogether.

This will likely create a short term (1-3 year) dip in property values that will bounce back over time, so it could create some opportunities. 

I actually don't see it having a huge impact on the insurance market, for two reasons: 1) major losses like this are reinsured, which caps the carriers' liability, and 2) the insurance market is statewide. The carriers generally budget for some areas to have hurricane losses, them just don't know where. 

[Aaron Porter]

Over the last few years we have seen huge increases in property insurance premiums... on top of that there have been a large number of carriers either go insolvent or shut down their operations in the gulf coast areas especially Florida which has suffered catastrophic losses due to hurricanes.  So I don't think it is out of the realm of possibility to see premiums continue to go up in those areas that are prone to violent storms such as hurricanes.  

[Stetson Miller]

Hi @Jarrett Boyes

As of now, although damage was widespread in Cape Coral, for the most part, it remained mild to moderate in terms of damages to personal residences. Because of that, the city's path to rebuilding really isn't too drastic depending on the specific area. A full public infrastructure restoration will likely put the city on a 1-2 month timeframe. Assuming that's feasible and ends up being the case, that would still allow Christmas and New Year's to be the official startup of the tourism industry in this area again. When I say this area, that's specifically limited to Cape Coral, which attracted a large tourist crowd on it's own, without leaning too much on the draw of Sanibel and Fort Myers Beach. Assuming tourists won't be back immediately after the city is back open, I do still think the January-March timeframe still has good income potential for STR's at this point in time

One other thing to note too though is that for those who are operating STR's and depending heavily on the tourism industry, there are a ton of displaced homeowners in this area now looking for short term leases while they're homes are repaired or while they look for a replacement. In addition to that, construction crews and contractors will also need somewhere to stay while they're need is still very high here. With those two things accounted for, I think it's very possible to keep a steady income and transition easily back into tourism-supported STR's once all of this clears up

In terms of insurance, @Jeff Copeland makes some great points above that I certainly agree with. Another thing I would add to that is that our state government is very aware of the insurance pricing challenges that this state as a whole is already experiencing. I wouldn't be surprised at all if they passed legislation that wouldn't allow insurance companies to drastically increase rates due to recent storm damages in the area as a whole

[Jordan Wight]

@Stetson Miller - what draws tourists to Cape Coral, if not surrounding things like Sanibel or Fort Meyers?

[Danielle Dickens]

Quote from @Jordan Wight:

@Stetson Miller - what draws tourists to Cape Coral, if not surrounding things like Sanibel or Fort Meyers?

Snowbirds love Cape Coral! Great area for midterm rentals. 

[Jordan Wight]

@Danielle Dickens Snowbirds aren’t really tourists, are they? But I’m interested to know what draws snowbirds as well as tourists. 

[Stetson Miller]

@Jordan Wight Like @Danielle Dickens mentioned above, we do have a very heavy seasonal shift over the winter here, largely comprised of retirement age people coming from up North

Many of these people who now own here or rent for 1-6 months of the year originally started out as tourists, where they were drawn in by the pricing for waterfront property compared to other local markets such as Tampa/St. Pete, Sarasota, and others on the East coast such as the Miami/Fort Lauderdale areas

Once here, Cape Coral offers very similar amenities to these other larger markets mentioned above such as tons of local restaurants and shopping, fishing, boating, and well-supported night life. Cape Coral isn't necessarily the vacation destination for families, who are more focused on the beach access. Those types of destinations tend to be Bonita Springs, Naples, and Fort Myers Beach. Most of the retired population and snowbirds are perfectly content staying in Cape Coral though!

[Caroline Gerardo]

Some insurance companies do not have reserves to pay massive claims. State and Federal government will reorganize flood insurance and rates will go up. Forced place flood through tax assessor is proposed. @Stetson Miller @BiggerPockets Investor Concierge  Who pays for the increased risk? 15% of homeowners do not carry flood insurance and expect the state to pay for clean up. If Universal (insures 577000 homes) pulls out of Florida because they know flooding happens now every three years, losses cost billions and the government caps the rates they will go. - United pulled out just now like American Cap, Avatar, Fednat, Florida Spec, Guarantee, Gulfstream, Physicians, Quality... what if there are no insurance companies and ONLY Federal insurance ? Coverage will be very low. Claim cleanup, removal and rebuild cost $200000 and crummy insurance gives the homeowner $15000 and the lot cleared.

Then there is this pickle: 21 million people in Florida, 13% live below poverty of $2300 annual according to US Census. We don't want to see people in the Superdome again, Governor and President (who have been adversarial) both know this is not how to treat that 13%. Maybe you rent to displaced persons, maybe Federal government subsidizes if the state requests such help. Retired persons might sell and move back to places where it snows as maybe avoids being evacuated every couple of years. 

Removal of mangroves and natural barriers to build water front housing means future flooding.  Fixing that is a fifteen year project. Rebuilding the bridge eighteen months if the Federal government offers incentives to complete early/ on schedule/ if the state ASKS for Federal help.

Tourists go somewhere else for a year. They can easily pick another sunny place and perhaps not return.

Market was declining before Ian. Back out of your deal and hunt for lower priced opportunities. Call the cancel an act of god and get your EMD back. Larger than natural forces you cannot control these outcomes. Add to your plan in the costs of vacancy, double the insurance, expect to pay triple for anything at a hardware store...

I LOVE Florida it has amazing natural beauty. It will come back.

[Stetson Miller]

@Caroline Gerardo These are a few good points, and more insurance companies pulling out of Florida is a very possible reality for the coming years. With that being said, this is all 100% speculative at this point, and until we have some real-time data in front of us, no one can say with certainty what the outcome will be

What we do have is other areas in Florida to compare this event to that have previously seen damage on this level, such as Mexico Beach near Panama City and that general surrounding area. None of what you're describing has occurred in that specific market since Hurricane Michael hit them in 2018

To say this market was declining prior to Ian is simply not true though. Prices over the last 6 months were still up, demand for housing was increasing, and we now have a drastically lower supply to deal with than we previously did. Many retirees who originally moved to these coastal areas from up North have no interest in going back to where they came from. What is more likely is a consideration further inland that is better protected from 500-year events like these

[Caroline Gerardo]

@Stetson Miller  Like most of America the frenzy of 30 buyers ended in December 2021. Inventory is slow to increase. Days on market greatly increased. Price reductions had not been seen for two years, now there are many. Owners are going to be listing. 

This may not be a "500 year event"  weather seems more extreme. People love a view of the water. We need to make that secure.

[Bill Schrimpf]

@Stetson Miller - Do you think now is a good time for new investments in your area?  As one realtor to another, I know the default answer :).  

Are you seeing a --temporary-- dip in prices starting now?  As a budgetary number, how much is insurance (or was last month) as a percentage of price or value?

[Don Miller]

It is an interesting time for sure.  
As an outsider looking in (but following very closely), I am in a lot of Cape Coral facebook groups for residents, local government, etc. 
I see quite a lot of residents who were displaced (or displaced from the nearby islands) looking for rentals, many for yearlong rentals.  While some jobs are lost from the effects of the storms, I see a lot of new jobs and outside help coming to SWFL for the recovery process.  The cleaning, repair of structures, businesses, roadways, bridges, ect among FMB, Pine Island, Sanibel, and Captiva will take well over a year, and likely several years to fully develop.  I think all of these areas are going to have a strong draw factor for visitors, businesses, and residents.

As far as an immediate dip in prices, well Cape Coral is still 75% without power.  I don't think there's a ton of focus on real estate sales this week.

Realistically, I don't know what's to come for this market in the immediate future, but it hasn't lost its appeal to me.

[Stetson Miller]

@Bill Schrimpf Honestly it's too soon to even make a decision like that when looking at the heavily affected areas like Cape Coral (still less than 50% power restoration), Pine Island, Fort Myers Beach, and Sanibel (collective ZERO percent power restoration). For days after the storm hit we saw next to zero MLS activity other than maybe the occasional price change. We're starting to see that come back in now, but it's likely going to be a few months before you could hope to see anything from the highly damaged areas

With that being said, there are many other areas here slightly inland that were largely unaffected and have little to no damage. I would say that buying opportunities have been stable and are exactly what they were before. One thing we have seen a major difference in for these safe markets though is a massive increase in demand for rentals from local displaced homeowners. This, in my opinion, still poses a good investment as it did before the storm, but now has even higher growth potential due to the massive influx of demand

Finally, regarding insurance, it's the answer that no one likes, but it depends. In Florida, there are so many things you can be penalized for, but also credited for when purchasing insurance. Combining those two things results in massive swings in potential quote pricing. To give you an example, a new construction 2,000 sq ft new construction SFH could be fully insured for around $1,000 annually on a good day. This would be accounting for full hurricane roof precautions, impact windows, and other smaller possible credits. Now, for the same layout and size, if you were to take away all those credits and assume the property was built in 1995, and is in a flood zone, insurance could easily be in the $10,000+ range annually. The kicker is that both of these homes could be in Cape Coral, but the new construction could be purchased for significantly less

[Bill Schrimpf]

Quote from @Stetson Miller:

@Bill Schrimpf Honestly it's too soon to even make a decision like that when looking at the heavily affected areas like Cape Coral (still less than 50% power restoration), Pine Island, Fort Myers Beach, and Sanibel (collective ZERO percent power restoration). For days after the storm hit we saw next to zero MLS activity other than maybe the occasional price change. We're starting to see that come back in now, but it's likely going to be a few months before you could hope to see anything from the highly damaged areas

With that being said, there are many other areas here slightly inland that were largely unaffected and have little to no damage. I would say that buying opportunities have been stable and are exactly what they were before. One thing we have seen a major difference in for these safe markets though is a massive increase in demand for rentals from local displaced homeowners. This, in my opinion, still poses a good investment as it did before the storm, but now has even higher growth potential due to the massive influx of demand

Finally, regarding insurance, it's the answer that no one likes, but it depends. In Florida, there are so many things you can be penalized for, but also credited for when purchasing insurance. Combining those two things results in massive swings in potential quote pricing. To give you an example, a new construction 2,000 sq ft new construction SFH could be fully insured for around $1,000 annually on a good day. This would be accounting for full hurricane roof precautions, impact windows, and other smaller possible credits. Now, for the same layout and size, if you were to take away all those credits and assume the property was built in 1995, and is in a flood zone, insurance could easily be in the $10,000+ range annually. The kicker is that both of these homes could be in Cape Coral, but the new construction could be purchased for significantly less

 Thank you for a well-thought-out answer!  Much appreciated! 

[Peter Davis]

Over the past week I've been driving around Cape Coral checking on clients and friends. What I've seen is the older waterfront homes (50's 60's 70's 80's homes) at lower elevations were badly flooded. The riverfront neighborhoods in the Yacht Club, for example, were hammered. Everyone who owns an older home has dragged all the soggy belongings (furniture, appliances, clothes, toys, knickknacks, etc.) out to the streets which are covered in mud, and there are downed trees, fences, pool cages, boats on front lawns, a major mess. But the newer homes at higher elevations appeared relatively untouched. The inland homes had wind damage like I've seen after Irma, but are for the most part recoverable. For example, I didn't see one home with catastrophic roof failure (though I'm sure some are out there) but at most I got glimpses of plywood here and there with lost shingles and underlayment. The level of storm surge was unique with Ian and that's what really devastated the area. The extreme high winds are similar to what we've seen before with other hurricanes and so you see that type of wind damage everywhere, but it's the level of flooding that's new for here. I was helping a friend whose older home was flooded with 5" of water and mud and she was wondering what's the point of rehabbing her current home if she can't change the elevation, which hits the point that @Caroline Gerardo brings up about the 500-year flood event. Hurricanes are only going to get worse, or at least ones with Ian's strength will be more prevalent, it's just a matter of who's going to take the hit; it's Russian Roulette. We thought it was going to be Tampa Bay before Ian took a hard right and crashed into Southwest Florida. I think these hurricanes could potentially be 5 or 10-year events going forward; I hope I'm wrong but if I'm an actuary at an insurance company, that's going to figure in to my analysis. Homes near water will have to be built stronger, higher, smarter. 

All this said, I didn't hear anyone talk about pulling up stakes and leaving the area. One client of mine lives on a gulf access canal just off Bimini Basin in the Yacht Club neighborhood of Cape Coral. The wind tore down her pool cage and the storm water flooded her older home (and car) several inches. She spent the next two days mopping water and mud out her home with no running water or power. When I stopped in to check on her earlier this week she was tired but her spunky spirit was still evident. We laughed over the fact that her German Shepard, Remy, still used his dog door in the one standing section of the pool cage even though the pool area was wide open. Her plan is to make some repairs and stay in her home. She's 90 years old.

[Jay Hinrichs]

Quote from @Peter Davis:

Over the past week I've been driving around Cape Coral checking on clients and friends. What I've seen is the older waterfront homes (50's 60's 70's 80's homes) at lower elevations were badly flooded. The riverfront neighborhoods in the Yacht Club, for example, were hammered. Everyone who owns an older home has dragged all the soggy belongings (furniture, appliances, clothes, toys, knickknacks, etc.) out to the streets which are covered in mud, and there are downed trees, fences, pool cages, boats on front lawns, a major mess. But the newer homes at higher elevations appeared relatively untouched. The inland homes had wind damage like I've seen after Irma, but are for the most part recoverable. For example, I didn't see one home with catastrophic roof failure (though I'm sure some are out there) but at most I got glimpses of plywood here and there with lost shingles and underlayment. The level of storm surge was unique with Ian and that's what really devastated the area. The extreme high winds are similar to what we've seen before with other hurricanes and so you see that type of wind damage everywhere, but it's the level of flooding that's new for here. I was helping a friend whose older home was flooded with 5" of water and mud and she was wondering what's the point of rehabbing her current home if she can't change the elevation, which hits the point that @Caroline Gerardo brings up about the 500-year flood event. Hurricanes are only going to get worse, or at least ones with Ian's strength will be more prevalent, it's just a matter of who's going to take the hit; it's Russian Roulette. We thought it was going to be Tampa Bay before Ian took a hard right and crashed into Southwest Florida. I think these hurricanes could potentially be 5 or 10-year events going forward; I hope I'm wrong but if I'm an actuary at an insurance company, that's going to figure in to my analysis. Homes near water will have to be built stronger, higher, smarter. 

All this said, I didn't hear anyone talk about pulling up stakes and leaving the area. One client of mine lives on a gulf access canal just off Bimini Basin in the Yacht Club neighborhood of Cape Coral. The wind tore down her pool cage and the storm water flooded her older home (and car) several inches. She spent the next two days mopping water and mud out her home with no running water or power. When I stopped in to check on her earlier this week she was tired but her spunky spirit was still evident. We laughed over the fact that her German Shepard, Remy, still used his dog door in the one standing section of the pool cage even though the pool area was wide open. Her plan is to make some repairs and stay in her home. She's 90 years old.

people will raise their foundatins and put the houses up on stilts like in Charleston SC  Russian River CA. and biloxi shore line  very common .
figure out the 500 year flood plain and raise the home.. many of the homes I built in Charleston the first floor is Garage with louvered shutters to allow the water to flow through living space 8 to 12 feet above.  

[Justin Rademacher]

I am an agent in the fort myers/cape coral area. Fort Myers Beach obvious got hit pretty hard. What I am encouraged by right now is the progress that is being made in such a short period of time. They have already created temporary bridges and fixes to get to sanibel/captiva/ and Pine Island. That originally wasn't going to be done until late October. 

I haven't seen much of a dip in pricing quite yet. I would imagine that will happen to a certain extent. In my personal opinion, I think certain areas will be back up and running for the STR market sooner rather than later. People are still coming down here from all over the country and they are still wanting places to vacation. Would love to chat more with you if you would like regarding all the progress I am seeing being made down here in such a short period of time.

[Justin Rademacher]

This is a very valid question. Obviously none of us have a crystal ball but for what it's worth, here is my 2 cents. 

It is very unfortunate what happened. Many people lost their homes in this tragedy. With that being said, I think there is an amazing opportunity to still invest and help these individuals in the process. By purchasing SFHs and renting them out to people who have lost their homes and/or workers that have traveled here from out of state. One thing to look into would also be renting out by the room in certain areas that allow it. 

In regards to the market, things are progressing much faster than originally anticipated. There is no doubt that Fort Myers Beach will take a while to recover but here is what I am seeing in the area:

1. Sanibel bridge is already open and has been for a while now. This was orginally not projected to be open until late October at the earliest

2. Pine Island has a bridge already built while the other original one is being fixed

3. Downtown Fort Myers is seeing significant improvements. Some of the local restaurants and shops on 1st street are already open.  

Although this tragedy happened, there is plenty of opportunity to still invest and help people at the same time. My personal opinion is that we will see the vacation rental market come back in 4 to 6 months. Let me know if you have any questions about what is going on down here. I would love to answer any questions or concerns you may have

[Alice Horn]

Quote from @Jarrett Boyes:

We are in the process of trying to close on a property in Cape Coral and obviously have been put on pause with the hurricane.   What are the thoughts on how the area will be able to bounce back from a tourism standpoint?   My main concern with tourism is with the causeway to Sanibel Island being taken out and the access to those great beaches being gone.  This was an investment property for us so we are trying to understand what kind of hit we will take.  Also, thoughts on if insurance rates are going to hold or skyrocket?

Check out yesterday's great article in BP by Lindsay Frankel. She adds some history on what has happened after past hurricanes (these coastal areas have actually appreciated) and provides a thoughtful analysis of the Florida insurance market.

https://www.biggerpockets.com/...

[William M Drake]

I'm seeing quite a bit of outside money coming in because as we rebuild our community, its going to be really nice. I've heard Vanderbuilt beach opened back up, going down there today or tomorrow to confirm. Things have been tough here the last 2 months, and we have a lot of rebuilding to do but things are looking up. I'm finding some deals on the beach and Sanibel, but many people are still sorting out insurance claims and not ready to make a move.