Woods Hole Researcher: "Insane To Own Or Lend" In Florida Real Estate Markets

[hatrack]

Hurricane Michael killed seven people and caused more than $6 billion in damage in Florida in October, a toll compounded by warmer, higher seas and wetter air, the signs of climate change scientists have long warned about.

But investors have yet to pay any kind of meaningful attention, buying up long-dated debt and financing real estate decades into the future. That kind of market neglect means the Florida economy can be expected to “go to hell,” warned Spencer Glendon, a senior fellow at the Woods Hole Research Center and a former partner and director of investment research at Wellington Management. “No one should be lending for 30 years in most of Florida,” he said at an investment conference in New York last week. “During that time frame, insurance will disappear and terminal values” -- future resale income -- “will shrink. I tell my parents that it’s fine to rent in Florida, but it’s insane to own or to lend.”

EDIT

Trends in local municipal-bond and mortgage markets suggest they may not. The risks of climate change have begun to pop up in prospectuses and credit-analysis, to little effect. Ahead of a new debt offering last month, Miami Beach told potential investors that officials are “keenly aware of the risk from hurricanes and sea-level rise.” Miami Beach successfully raised its $162 million, with a 20-year maturity pricing at the same yield as a similar April offering by Charlotte, North Carolina, an inland city with much less climate risk. Both issues had the same call provisions, coupons and ratings from Moody’s and S&P.

Comparisons are difficult, but if markets were acknowledging the scale of Florida-specific climate risk, Florida’s bonds should sell at a discount, relative to similarly structured bonds sold elsewhere. “I don’t know whether the right price is half-price or 60% or 20%, but if it’s at 100%, I know it’s the wrong price,” Glendon said in an interview.

EDIT

https://www.bloomberg.com/news/articles/2019-05-13/lenders-scolded-for-climate-ignorance-in-insane-florida-deals

[wasupaloopa]

1. Someone has to own a house before you can rent it. I doubt anyone would take out a 5 yr mortgage and

rent for less than the monthly payment.

This idea is to rent rather than risk ownership of a house that will be destroyed by climate change.

May as well lock up the state and everyone move out. The last one leaving should turn out the lights.

[appal_jack]

2. Leave FL to the pythons and melaleuca.

Restore the hydrology of the Everglades and let mama nature do her thing.

It is not likely to happen while anyone thinks they can make money, and I am afraid that the illusion and shell game will persist for quite a while...

-app