In Southwest Florida, high home insurance rates are driving away would-be buyers

Florida's southwestern coast — long one of America's fastest-growing regions — is losing some of its boomtown swagger as a home-insurance crisis and other soaring costs make homes unaffordable.

Homeowners from Sarasota south to Naples, known for its eight-figure waterfront mansions, are having a tougher time selling their properties, and the buildup in inventory has caused home prices to fall at some of the fastest rates in the nation. Realtors point to rising insurance costs that were exacerbated by Hurricane Ian in 2022, prompting some homeowners to list their homes for sale and would-be buyers to walk.

"You've got people that went through the storm and just want to move on, and don't really think the affordability is here anymore because of insurance," said Marlissa Gervasoni, president of the Royal Palm Coast Realtor Association. "From what I'm seeing, I believe they are looking for areas that might be less costly."

Southwest Florida has been one of America's fastest-growing regions for decades, historically luring retirees from the Midwest drawn to its warm winters, prevalence of golf courses and relatively affordable housing. In recent years, agents have said they're seeing more newcomers from the Northeast and other regions, and the area's rise in home prices has outpaced the nation overall. 

However, several factors are converging and hitting the region's normally hot real estate industry all at once, said Amir Neto, director of the Regional Economic Research Institute at Florida Gulf Coast University. Developers are bringing a wave of multifamily residential projects online just as a pandemic-fueled surge of migration slows and high mortgage rates weigh on housing demand, Neto said.

Add to the mix an insurance crisis, and a seller's market is becoming a buyer's one, he said.

Homeowners policies across Florida started soaring in 2020 because of what insurers and state regulators attributed to rampant lawsuits and fraud. Rates in the state climbed as much as 33% annually, then shot up another 42% last year in the aftermath of Hurricane Ian, according to the industry-funded Insurance Information Institute.

Ian, a Category 5 storm that was the third-costliest in U.S. history, led some insurers to pull out of the state or limit new policies. Floridians paid $6,000 on average for insurance last year, about triple what they paid in 2019. By comparison, the average US homeowner paid about $1,700 in 2023, the III said. 

In Fort Myers, where hundreds of homes and business were destroyed by Ian, "we're seeing anywhere from a 50-to-100% increase in spending depending on the age of the home," said Gervasoni, head of that area's Realtors board.

Florida legislators have passed laws recently to bring insurers back into the state and lower rates, but they remain high.

Today, Cindy Blackburn and her husband feel stuck in what was once their Cape Coral dream home, unable to sell and move closer to family up north.

Hurricane Ian blew ashore not far away on a barrier island called Cayo Costa, damaging the Blackburns' roof and everything underneath. For a time, they lived in an RV while contractors rebuilt their house, all the while battling with an insurance company that put up obstacles to getting reimbursed, Blackburn said. Ultimately, they self-funded most of the $250,000 in repairs.

By last summer, the Blackburns were ready to sell their home and move to Tennessee or North Carolina. They listed it in August, but it languished until last month and they took it off the market. Their broker at the time never disclosed they couldn't sell the property while they still had an insurance claim pending, Blackburn said. They've since found a new agent, Gervasoni, and are hoping a lawyer can resolve their insurance claim.

"This was to be our retirement house, and having gone through what we've gone through, we've realized this is not where we belong," said Blackburn, 59.

Likewise, homes for sale are piling up in some cities.

Active listings of single-family homes in the Cape Coral-Fort Myers area were up 62% last month compared with a year earlier, while those in Punta Gorda — which is 100 miles south of Tampa — were up 139% in December from a year ago, according to local Realtors boards. Supply is up in Naples, too, but not by as much.

Some of the spike is a fluke. After Hurricane Ian ravaged the region in September 2022, thousands of people, like the Blackburns, suffered damage to their homes and filed insurance claims. Now that most of those claims have been resolved, people can put their homes up for sale.

Prices have taken a hit. Of the 12 metropolitan areas with the sharpest drops in median sales prices in the past year, four are in Southwest Florida, according to the National Association of Realtors. Prices in the Naples-Immokalee-Marco Island area fell 5.9% in the fourth quarter of 2023 from a year earlier, the third-steepest drop in the group, NAR data show.

"It needed to happen, or else we were going to price everyone out of the market," said Tony Barrett, president of the Realtor Association of Sarasota and Manatee. He calls the slowdown a "reset" rather than a down market. 

The rise in listings — which is also happening in the broader state of Florida, but to a lesser degree — stands in contrast to the national trend, as high mortgage rates have discouraged homeowners from moving. To be sure, some of the state's increase in supply represents a normalization from extremely low levels, but it's also due to higher insurance costs and the rise in home prices in recent years, said Brad O'Connor, chief economist at the statewide Florida Realtors.

"Affordability has eroded in a big way," O'Connor said.