“Pessimists selling to optimists.” That’s how one former Florida coastal property owner describes the current state of the market in a must-read Bloomberg story.
Right now, science and politics don’t favor the optimists. The disintegration of the Greenland and Antarctic ice sheets is speeding up, providing increasing evidence we are headed for the worst-case scenario of sea level rise — three to six feet (or more) by 2100.
The impacts are already visible in South Florida. “Tidal flooding now predictably drenches inland streets, even when the sun is out, thanks to the region’s porous limestone bedrock,” explains Bloomberg. “Saltwater is creeping into the drinking water supply.”
At the same time, President Trump is working to thwart both domestic and international climate action while slashing funding for coastal adaptation and monitoring. E&E News reported earlier this month that the EPA has already “disbanded its climate change adaptation program” and reassigned all the workers.
Faster sea level rise and less adaptation means the day of reckoning is nigh. Dan Kipnis, chair of Miami Beach’s Marine and Waterfront Protection Authority — who has failed to find a buyer for his Miami Beach home for nearly a year — told Bloomberg, “Nobody thinks it’s coming as fast as it is.”
But this is not just South Florida’s problem. The entire country is facing a trillion-dollar bubble in coastal property values. This Hindenburg has been held aloft by U.S. taxpayers in the form of the National Flood Insurance Program.
A 2014 Reuters analysis of this “slow-motion disaster” calculated there’s almost $1.25 trillion in coastal property being covered at below-market rates.
When will the bubble burst? As I’ve written for years, property values will crash when a large fraction of the financial community — mortgage bankers and opinion-makers, along with a smaller but substantial fraction of the public — realize that it is too late for us to stop catastrophic sea level rise.
When sellers outnumber buyers, and banks become reluctant to write 30-year mortgages for doomed property, and insurance rates soar, then the coastal property bubble will slow, peak, and crash.
The devaluation process had begun even before Trump’s election reduced the chances we would act in time to prevent catastrophic climate change. The New York Times reported last fall that “nationally, median home prices in areas at high risk for flooding are still 4.4 percent below what they were 10 years ago, while home prices in low-risk areas are up 29.7 percent over the same period.”
Sean Becketti, the chief economist for mortgage giant Freddie Mac, warned a year ago that values could plunge if sellers start a stampede. “Some residents will cash out early and suffer minimal losses,” he said. “Others will not be so lucky.”
As this week’s Bloomberg piece puts it, “Demand and financing could collapse before the sea consumes a single house.”
So here’s a question for owners of coastal property — and the financial institutions that back them — as they watch team Trump keep his coastal-destroying promises: Who will be the smart money that gets out early — and who will be the other kind of money?