Many people are calling 2017 “The Year of Water.” Why?

– Hurricane Harvey dumped 60” of rain in Houston and shattered all American meteorological records
– Hurricane Irma was the strongest tropical storm ever recorded outside of the Gulf of Mexico and the Caribbean Sea. Irma turned Miami into a bank-splitting river.
– Category 4 Hurricane Maria slammed Puerto Rico. Basic systems on the island are still not functioning.

All in all, 2017 has been the most expensive hurricane season ever with costs in excess of $200B…so far. The federal government through direct aid (FEMA or Federal Emergency Management Agency services) and/or through federally insured, subsidized flood insurance plans keep hurricane-hit areas, residents and lenders afloat.

Without these programs, lenders would think more than twice about financing homes in these areas, residents would think more than twice about staying put in these areas and local elected and tax officials would think more than twice about how much money and how much effort can go into rebuilding these areas. Sure, New Orleans (2 X larger tax base) and Homestead, Fla (3 X large population base) are back after Hurricanes Katrina and Andrew but…

What happens to areas ravaged by hurricanes over and over again in shorter and shorter time frames?

Moody’s, the bond credit rating business, has already announced that it will downgrade the worth of municipal bonds in Texas, Florida, Georgia and Mississippi.

Zillow has already predicted a 6’ rise in sea level by 2100. Such a rise would submerge some 30% of Miami homes (approximately $16B in property values) and some 1.94M homes nation-wide…one third of those homes being in the bottom third of the housing market, according to Zillow.

The Union of Concerned Scientists (UCS) has already reported that the number of communities facing the constant threat of rising water/sea levels will nearly double in 20 years. Attom Data Systems corroborates UCS findings. By projecting that New York could be “…experiencing Hurricane Sandy-like flooding every 5 years within the next three decades.

Could there be a scenario where lenders and insurers evacuate coastal markets due to the fear of constant hurricane threat along with the residual threat of homes not holding their respective values through the life of 30-year mortgages? And could there be a scenario where the constant fear of hurricane threat makes homeowners desperate to sell their houses that no one wants to buy?

According to Edward Golding, former head of the Federal Housing Authority and now a fellow at the Urban Institute, yes, there could be such scenarios. “…at some point we’re going to reach a tipping point and no one will touch these mortgages…at some point, it (hurricane risk) becomes undesirable risk and people will start pulling out from entire regions.”

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