Waterfront Home Values Fall Because of Sea Level Rise, Flooding

November 6, 2018, is fast approaching and voters have the choice between (i) candidates of a political party that denies that climate change is occurring and that is tearing down environmental regulations that seek to slow the climate change process, and (ii) candidates of the opposing party that see climate change among the most pressing problem facing the federal government.  While sadly a number of local "friends" are falling for the racist, xenophobic message of the climate change deniers, those with waterfront properties might want to rethink who they will vote for on election day.  In Hampton Roads the value of waterfront properties is falling or, at best appreciating far more slowly than the values of properties on high ground away from the water.  The phenomenon not only hits homeowners in the pocket books as their typically biggest investment is harmed, but it also erodes city tax bases.  In short, everyone loses in one form or another -  all so Republicans can pander to an ignorance embracing party base.  A piece in the Virginian Pilot looks at the problem which is not confined to Southside cities.   Here are excerpts:

Waterfront homes used to be the safest investment in real estate, but rising tides have turned a sure thing into a potential liability.

After a review of property value data and a litany of studies, The Virginian-Pilot has found mounting evidence that real estate values across Hampton Roads are being driven down as a result of recurrent flooding and sea level rise.

One couple in Norfolk has had their waterfront house, once valued at more than a million dollars, on the market for two years. They’ve dropped the price to less than $800,000 and are still waiting for a buyer.

And it’s not just seven-figure waterfront homes in Norfolk and Virginia Beach taking the hit. Values of seemingly safe houses several blocks from the water are hurting as well.

Several recent studies have shown that impacts from flooding – from water in the basement to inundated streets – already have hamstrung property prices and cost Hampton Roads homeowners hundreds of millions of dollars in lost or unrealized values.  Homeowners might be surprised by these staggering numbers – in many places where research shows flooding is hurting home prices, city assessments show those values rising. They’re just not rising as fast as they could be.

“Part of the idea of getting these numbers out there is that people may not know they’ve lost value, because the actual value may still be going up,” said Jeremy Porter, a Columbia University professor who worked on the recent study with the First Street Foundation, a nonprofit that pushes for solutions to sea level rise by presenting data.

[R]eal estate agents to academics to homeowners agree that recurring flooding and rising seas are driving down the value of what were once considered desirable investments.

A group from First Street and academics from Columbia University developed Flood iQ, a website that allows people to see how the values of waterfront homes have fared since 2006 when compared to similarly valued homes that don’t deal with flooding.

The Washington Post recently highlighted Flood iQ and two other academic studies that came to the same conclusion: Coastal property values aren’t keeping pace. The First Street group studied the values of homes from Virginia to Florida dating back to 2006 and found they’re worth $7.4 billion less than they would be otherwise.

Three-quarters of that loss was due not to flooding homes, but flooding streets, said Steven McAlpine of First Street Foundation.

Our home is on what was once the premier street in Hampton.  After seeing the value drop during the real estate meltdown of a decade ago, the value has stabilized but has not appreciated as one might expect.  Why?  We are located on a tidal creek with 4.6 acres of creek and marsh - the setting is gorgeous but the threat of flooding only too real.

Sea level Rise is Already Costing Coastal Property Owners

Coincidentally, as I happened upon this Washington Post article that focuses on Charleston, South Carolina, but which is all too applicable to coastal Virginia, we received the annual flood insurance premium invoice and it's almost as much as I paid for the first car I bought new after graduating from law school.  The premium is  up about 8% over last year's amount and like some of the property owners cited in the article, the value of our waterfront property has plateaued (but, thankfully has not fallen  since the 2008 housing market collapse) due to the increased concerns over rise sea levels and past flooding episodes.  Meanwhile, of course, Republicans at both the Virginia level and Congressional level are claiming that climate change is a hoax and sea levels are not rising.  And meanwhile, many coastal communities are seeing their tax base eroded as properties become more difficult to sell.  Parts of Norfolk, Virginia Beach, Chesapeake, Suffolk, Hampton and York County are approaching what is described in the article.  Here are article excerpts:

CHARLESTON, S.C. — Elizabeth Boineau’s 1939 Colonial sits a block and a half from the Ashley River in a sought-after neighborhood of ancient live oaks, charming gardens and historic homes. A year ago, she thought she could sell it for nearly $1 million. But after dropping the price 11 times, Boineau has decided to tear it down.

In March, the city’s Board of Architectural Review approved the demolition — a decision not taken lightly in Charleston’s historic district.

“Each time that I was just finishing up paying off the bills, another flood would hit,” Boineau said.

Boineau is one of many homeowners on the front lines of society’s confrontation with climate change, living in houses where rising sea levels have worsened flooding not just in extreme events like hurricanes, but also heavy rains and even high tides. Now, three studies have found evidence that the threat of higher seas is also undermining coastal property values, as home buyers — particularly investors — begin the retreat to higher ground.

The sea has risen about eight inches since 1900, and the pace is accelerating, with three inches accumulating since 1993, according to a comprehensive federal climate report released last year. Scientists predict the oceans will rise another three to seven inches by 2030, and as much as 4.3 feet by 2100.

Meanwhile, mapping has become increasingly precise, providing near-exact elevations that let researchers predict when individual properties could be underwater.

[R]esearchers at the University of Colorado at Boulder and Pennsylvania State University found that vulnerable homes sold for 6.6 percent less than unexposed homes. The most vulnerable properties — those that stand to be flooded after seas rise by just one foot ­— were selling at a 14.7 percent discount, according to the study, which is set to be published in the Journal of Financial Economics.

The study found the drop in prices appears to be driven primarily by investors buying multiple properties or second homes. Such buyers tend to be wealthier and better educated than owners who occupy their coastal homes . . . . “Sophisticated buyers . . . demand a discount to bear the risk of future sea level rise,” Lewis said in an email.

The most-studied market has been Miami-Dade County, parts of which have for years been experiencing regular sunny-day flooding. In a separate paper published in April, researchers at Harvard University found that properties at higher elevations were appreciating faster than properties at lower elevations, a phenomenon they dubbed “climate gentrification.”

Last month, the nonprofit First Street Foundation released the first analysis to single out Charleston, a gracious port city founded in 1670. The analysis suggests that exposed homes in Charleston have lost $266 million in value since 2005 due to coastal flooding and expectations of still higher seas. (Using the same method, the First Street researchers found a $465 million loss in Miami-Dade County.)

Home prices on the coast are “going up along with market trends. They’re just not going up as fast as other places,” said Jeremy Porter, a Columbia University researcher who conducted the First Street study with Steven McAlpine, the group’s head of data science.

Boineau put her house on the market last August priced just shy of $1 million, after repairs from two straight years of flooding that had come up under the house but left the interior largely unaffected. Then in September, the remnants of Hurricane Irma inundated the first floor of the house with eight inches of water. . . . .she dropped the price down to $599,900 and went through a lengthy process to get permission for demolition.  Now, Boineau says, a new buyer can build a new elevated property on the lot. When that’s done, her real estate agent, Robin Reeves, said the property should “go for 1.3 to 1.4 million dollars.”

Charleston Mayor John Tecklenburg (I) — himself a former real estate agent — said the city is looking for other ways to protect property values. Officials are considering a “comprehensive set of flooding and sea-level-rise strategies,” including improving pumping systems and raising Charleston’s Battery, a sea wall at the tip of the peninsula.

But those are expensive and complex solutions, Tecklenburg said; even if Charleston had the money, designs are not even in place yet for all of the potential engineering projects.

As city officials adjust, so do Charleston residents. Unable to find a buyer willing to purchase and then repair the home, Boineau decided to demolish it and sell the lot in Harleston Village. She is now renting a condo just across the river from the city’s central peninsula in West Ashley, where her new neighbors have assured her there has been no flooding. She hopes to buy there after the Harleston lot sells. “Charleston,” she said, “is still an incredible place to live.”

In our home we have installed three industrial sump pumps and a whole house generator (to the tune of $20,000) and after the 2009 Nor'Ida storm more or less waterproofed the first floor by installing marble floors and non water absorbent wainscoting.  The combined effect?  No standing water in the house and merely mopping out any water that may seep into the house in any future storm.  Numerous homes in our neighborhood are much more vulnerable than our home. Yes, sea level rise is costly. 

Norfolk, Virginia - A City of Misplaced Priorities

The City of Norfolk, Virginia likes to portray itself as a modern progressive city.  Like so much in Virginia it is a sham facade meant to disguise a city that still operates largely on a "good old boy" system and where some neighborhoods and businesses get preferred treatment while the rest are largely left to fend for themselves and are supposed to be satisfied with whatever scraps are thrown their way bu the self-anointed city fathers.  Worse yet, despite all the studies that correlate gay friendly policies and acceptance to economic growth and attracting the so-called creative class Norfolk Mayor Paul Fraim is, in my opinion, a homophobe who views being gay or lesbian as a form of communicable disease.

 Two of the areas given very low priority by Fraim and his cohorts on City Council are (i) neighborhood maintenance and (ii) adequate police protection.   The first phenomenon was looked at  in an article in the Virginian Pilot where Norfolk is slashing its budget for neighborhoods while pledging many millions of taxpayer dollars to a new downtown hotel development.  Here are some article highlights:

Community leaders are upset that the city's proposed spending plan seems to favor new downtown projects over revitalizing struggling neighborhoods.

Norfolk's 2014 budget includes about $2.75 million for specific neighborhood plans, compared with $6 million last year, a change that City Manager Marcus Jones said is justified by a drop in the city's real estate revenue.

But some community leaders say the reduction threatens progress in key growth areas, such as Broad Creek, Fairmount Park, the Southside and Wards Corner, four communities among 20 with plans that outline strategic goals for improving infrastructure, acquiring land and rehabilitating struggling areas.

While the money problems are not new, neighborhood and city leaders say the cuts sting more now that the city has set aside money for other projects, including $4 million for a new Government Center Plaza downtown.

They also point to a decision this year to support a $126 million hotel conference center in downtown. That project will use $89 million in public money, including $16 million that the city has already spent.

As for inadequate and noneffective police protection, the Norfolk police department has been under manned for many years.   But worse yet, protecting taxpayers and their property seems to be a low priority.  How else to explain my experiences over the last three weeks.  In 2005 I bought a 1917 vintage arts and craft style house three blocks from the Old Dominion University campus.  I remodeled the kitchen and bathroom, repainted every surface  of the property, put on a new roof and installed new heating and cooling.  In short, I invested a lot of money as did other residents on my block.  I now live in Hampton with the boyfriend and my youngest daughter and her family live in the Norfolk house.  Where they are being terrorized by self-described gang members in a rental property that adjoins mine property at the rear.    Three weeks ago my house was hit by gun fire (see photo above) that shattered the rear storm door.  My family members have been harassed and intimidated, loud nuisance level music is the norm, etc.  What has been done to correct this situation? NOTHING.

Meanwhile, the police and City Attorney's office have the time to harass a client of mine who owns a restaurant for allegedly violating a city code noise ordinance.  Indeed a threat of criminal prosecution has been leveled.  Perhaps not coincidentally, my client is of Arabic descent.  Yet NOTHING has been done to stop the war zone behind my home despite calls and meetings with police and one meally mouthed message I received from the City Managers office.  

Visitors to Norfolk need to get a strong message - do not venture out of downtown or you may not be safe.  Self-described gang members are allowed to do whatever they wish while law abiding citizens cower in their homes and debate whether they need to go somewhere else for the night in order to be safe.  This is the real story of Norfolk under Mayor Paul Fraim and his gang of do nothing for regular citizens members of City Council.   Meanwhile I am left to ponder: do I sell the house and relocate my family members or do I let it go into foreclosure and drive down neighborhood property values?

More Dire Housing News - Especially for Hampton Roads

For the last three and one half years or more, I have argued that until the residential housing market stabilizes, there will be no improvement in the overall economy and the middle class will continue to become increasingly financially strapped. Government efforts to help home owners to date have been largely ineffectual and the ongoing wave of foreclosures is driving home values lower and lower. As Westlaw News is reporting U.S. Sen. Jeff Merkley seems to get the message and he is pushing for reforms to stem the foreclosure tidal wave and the attendant decimation of home values in some cities and regions. Part of his solution would be to add "cram down" relief in bankruptcy cases which would force lenders to accept lesser payoffs and/or to rusticate loans. The reality is that other than investors with money who are reaping incredible deals, everyone loses in a foreclosure, but most particularly homeowners losing their homes and their surrounding neighbors who find themselves with ruinous "comparables" when they go to sell or refinance in the form of nearby foreclosed homes. Here are highlights on Merkley's proposal:
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U.S. Sen. Jeff Merkley is urging President Obama to pay greater attention to the nation's foreclosure crisis and is pushing a revived proposal that would allow bankruptcy judges to modify the terms of first mortgages on primary homes.
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Key Democrats have sought unsuccessfully for more than three years to give bankruptcy judges the power to reduce the principal balances on such loans, a process known as “cramdown,” as a way to stem the tide of mortgage foreclosures.
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In a letter to the president, Merkley, an Oregon Democrat, said that despite the administration’s efforts, the country’s housing market continues to struggle.
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“[F]oreclosure filings continue at a pace of over 300,000 per month, devastating families across our nation,” Merkley wrote. He focused on the shortcomings of the Obama administration’s Home Affordable Modification Program, which was designed to help mortgage borrowers who meet certain eligibility criteria avoid foreclosure by obtaining loan modifications from participating servicers.
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“The goal of HAMP was to prevent 3 to 4 million foreclosures, but to date fewer than 600,000 homeowners have been approved for permanent loan modification,” Merkley wrote.
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In his letter, the senator outlines a six-point proposal to alleviate the foreclosure crisis. He fleshed out the plan in a document available on his website.
A key component of the plan is a “lifeline bankruptcy option,” which is essentially the same as “cramdown,” a process under which bankruptcy judges would be allowed to modify the terms of mortgages on primary residences.
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Another component of the plan is the establishment of a “national short refinance program” that would enable homeowners facing foreclosure to refinance their mortgages based on current interest rates and home values. This is designed to help homeowners who have steady income but who owe more on their mortgages than their properties are worth.
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Meanwhile predictions for property value drops in Hampton Roads, if accurate, will leave large numbers of homeowners "underwater" on their loans and often with no incentive to not simply walk away. Obviously, without relief, the downward spiral will then continue anew. Here are highlights from the Virginian Pilot:
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The slide in local home prices doesn't appear to be over. A local economist suggested that home prices in Hampton Roads will fall 3 to 5 percent this year. A local real estate executive suggested that home prices will fall 10 to 15 percent.
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Now, a new national forecast has suggested that the region's home prices will fall about 13 percent this year - more than in any other major metro area in the country.
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Clear Capital's conclusions are similar to those drawn by Van Rose, president of the new homes division of Rose & Womble Realty Co. In a column in the Tidewater Builders Association's magazine, Rose said he expects a 10 to 15 percent decline in prices for existing homes this year. "There is nothing to help stop the 7 million foreclosures in the pipeline, which means values will continue to be hard to hold," Rose said of the national foreclosure problem.
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"Prices have been steadily declining since mid-2007, with prices now 24 percent below the market peak," Villacorta said.

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President Obama, are you paying any attention to this ongoing disaster?

In Hampton Roads, 1 in 3 Homes with Mortgages "Uderwater"

I have been talking about the collapse of the residential real estate market both locally and national and predicted over two years ago that if something did not happen to stop the free fall, the larger economy would tank as well. Sadly, no one seemed to wake up until a year later and the economic nightmare continues to worsen with record numbers of foreclosures during the last month. In this area, home values have dropped even if not as badly as in some regions of the country. Nevertheless, a new study indicates that 34% of the homes in the area with mortgages on them are now "underwater," meaning that the outstanding mortgage balance exceeds what the home can now reasonably sell for. This leaves sellers either having to (1) bring money to the table to sell, (2) endeavor to negotiate a "short sale" where the mortgage lender agrees to a lower payoff - something not easily negotiated - or (3) walking away and allowing the home to go into foreclosure. The last alternative in turn helps to drive home prices even lower and the downward spiral continues. Here are some highlights from this story:

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More than 110,000 homeowners in Hampton Roads owed more on their mortgages than their homes were worth at the end of June as home prices continued to fall, according to a report released Thursday. That's roughly 34 percent of all mortgages in the local market, according to First American CoreLogic of Santa Ana, Calif., which tracks mortgages across the country. The firm's quarterly report, which generated data for Hampton Roads for the second time, also said that an additional 16,000 mortgages will be "underwater" if home prices in the area decline 5 percent from their current level.

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Homeowners who purchased at the peak of the local housing boom, especially with little or no down payment or an interest-only loan, are the most susceptible to finding themselves "underwater," or "upside down" - owing more than a home is worth. Falling home values can erode any equity homeowners have in a newly purchased or refinanced home. Across the country, more than 15.2 million homeowners owe more than their homes are worth. . .

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The new report suggests that homeowners in Hampton Roads were more likely to have borrowed against their homes as prices in the region rose, Agarwal said. "We never knew the extent to which people in the area had borrowed against their homes," Agarwal said. "We knew people cashed out, because over the last several years you saw taxable sales growing faster than incomes. So the only way you can spend more than you earned is dipping into your wealth, such as getting equity from your homes." The total aggregate value of homes at risk of defaulting in Hampton Roads at the end of June was nearly $26 billion, according to the report.

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The number of negative-equity loans in the region could be exacerbated by the prevalence of local mortgages guaranteed by the Department of Veterans Affairs with no down payments, Holland said. After fees, those loans typically are automatically underwater, he said. Home prices in South Hampton Roads have fallen 4.4 percent in the past year, according to Real Estate Information Network Inc., the local multiple listing service. The median sale price for existing homes in June was $222,750, down from $233,000 a year ago.

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And as the housing market continues to sicken, business in the real estate industry - realtors, title insurance companies, surveyors, real estate attorneys, etc. - continue to struggle as well. The nations lenders have received billions in bailout funds but few seem to be passing along any benefits whatsoever to struggling home owners.