--:-- Ryan Knudsen: For a lot of people, moving to Florida sounds like a dream. We need the sunshine and sea breeze, soft sand and palm trees of Florida. That's what we need to have. Florida. Where people come to play, and where the fortunate come to stay.
--:-- Ryan Knudsen: So, you have sunny weather, that tropical climate. That makes you feel like you're on vacation. That's our colleague Debra Acosta. You have these gorgeous beaches that arguably are the best beaches in the country. There's gorgeous golf courses everywhere you look. Swing palm trees, warm breezes, balmy weather. The ocean water is extremely warm. In addition to warm waters, there's also no individual income tax, less business regulation than a lot of other states, and a humming economy.
--:-- Debra Acosta: So many people have moved to Florida over the past few decades that it's even earned a name, the Great Florida Migration. So the state of Florida has consistently been growing quite a bit. You know, it suddenly became this promised land, this exciting place to migrate to and buy cheap land and, you know, create a new life for yourself.
--:-- Ryan Knudsen: Florida's population grew even faster during and after the pandemic. The latest U.S. Census data shows that Florida is the fastest growing state in the nation. Chances are you've noticed this trend when you drive around town or try to buy a house or rent an apartment.
--:-- Debra Acosta: As a result of all these new residents, the housing market has been hotter than the weather. Florida real estate over the last decade has just, like, shot up. Prices have more than doubled in that time period. And I'm talking median prices. If it's waterfront, then it's like quadrupled.
--:-- Ryan Knudsen: But now, after a string of damaging storms, there are signs that parts of the real estate market are stalling out. And for some homeowners, Florida no longer seems like such a great place to live. Homeowners like Dominique Tomlinson.
--:-- Dominique Tomlinson: Honestly, at this point, I don't care if I lose every dollar of equity I have in that house. I won't go back and live like that again. It's not worth the mental stress. It's not worth any of that. It's probably not sustainable for people like me and my husband who are just trying to make a life here.
--:-- Ryan Knudsen: Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Monday, October 21st. Coming up on the show, the great unraveling of Florida's once booming housing market. Why shop at Burlington? Maybe it's the deals that are new each time you drop by. Maybe it's the brand names you'll be shocked Burlington has in store. Or maybe it's the quality of the items, the amazing selection, and the newest trends.
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--:-- Ryan Knudsen: Dominique Tomlinson is a teacher, and she's one of the millions of people who moved to Florida over the past decade. Her family moved from New York in 2014.
--:-- Dominique Tomlinson: We really love it here. I think, obviously, the beaches are a huge draw. Like, we have some of the most beautiful beaches. But we also love downtown St Petersburg. It's a very like eclectic area. There's a lot of art down here. There are so many awesome restaurants.
--:-- Ryan Knudsen: In 2020 as the housing market heated up Dominique was one of the many people trying to take advantage of low interest rates.
--:-- Dominique Tomlinson: I think for a lot of middle-class people or people like teachers like me, you know, a home is a way that you can build wealth. And so that was really what drew me into buying a house.
--:-- Ryan Knudsen: So I bought my house by myself in 2020. Dominique closed on a three-bedroom house for about $200,000. It's a little seafoam green bungalow in a community called Shore Acres on Florida's Gulf Coast.
--:-- Dominique Tomlinson: She finds an opportunity to purchase a home just at 29 years old. And so she buys this adorable little cottage in a low-lying coastal neighborhood in Tampa Bay in St. Petersburg. I think it was built in like the 1960s. It has a pretty large living room and then a smaller kitchen. And her dad is a contractor, so he helps her turn it into her dream house.
--:-- Ryan Knudsen: I designed my kitchen. I picked out all the cabinets, the backsplash, all the appliances, every little fixture. She basically created her own little dream house in her 20s, which is so amazing. And it was like my own little piece of heaven, I guess. It was my oasis. It was my home. And I felt like I built it.
--:-- Dominique Tomlinson: She settled in and thought, this is going to be, you know, perfect. After a two-month renovation, Dominique moved in in August of 2020.
--:-- Ryan Knudsen: A few months later, in November, a small tropical storm started lashing the coast. At first, Dominique thought nothing of it.
--:-- Dominique Tomlinson: I went to bed as normal, and I woke up probably around like 12 o'clock in the morning, and my shoes were floating in the living room. I didn't even dawn on me like, oh, your house is flooding.
--:-- Ryan Knudsen: So I opened the front door and I was like, where is this water coming from? And there was like little waves lapping into my front door.
--:-- Dominique Tomlinson: That was just the first time Dominique's home flooded. It's flooded three times in the four years she's lived there. Last August, her home was flooded with two feet of water. And then, last month, during Hurricane Helene, the floodwaters reached four feet in her living room.
--:-- Ryan Knudsen: Dominique says she learned to prepare for these floods. She started keeping track of the tide charts and elevating her furniture to try to prevent water damage. But it's all becoming too much.
--:-- Dominique Tomlinson: I mean, when I met her, it was right after Hurricane Helene, and she's telling me who could live in here. I mean, it floods consistently. Hurricane Helene forced Dominique to confront an uncomfortable question. Whether her time in Florida, the state that she loves, might be coming to an end.
--:-- Ryan Knudsen: Yeah, it's definitely a consideration, yeah. You know, the facts are the facts, and the Gulf is hotter than it's ever been. And I don't think the hurricanes are going to stop. I think this might be our new reality, and I'm not sure it's a reality I want to live with.
--:-- Debra Acosta: And it's not just Dominique who's reaching her breaking point. That's next.
--:-- Ryan Knudsen: This episode is brought to you by State Farm. Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you.
--:-- Debra Acosta: After years of going up and up Florida's real estate market has started to plateau. And it's because of more than just hurricanes. The first thing to really squeeze the market happened in 2021. The search and rescue efforts that continue in South Florida right now, more than 24 hours after half of a condo building collapse.
--:-- Ryan Knudsen: The Surfside condo building collapsed in the Miami area, killing 98 people. After Surfside, the state passed new safety regulations aimed at preventing another collapse. That meant that a lot of old condo buildings throughout Florida would need to be reassessed and possibly upgraded. And all that was expensive. And those expenses were passed on to the owners.
--:-- Debra Acosta: It was kind of like it was an illusion that these condos were as inexpensive as these people were buying them for. Because all these costs were getting kicked down the road. Nobody was addressing them. And then it was like suddenly this big red flag emerged with this condo collapse, this tragic collapse that showed us, you know, wait a second. These condos need a ton of maintenance. We need to pour a ton of money into this. They're not as cheap as we thought they were.
--:-- Ryan Knudsen: And that also affected insurance. And the collapse had a broader impact on insurance premiums throughout the state. It's part of what has affected this rise in insurance rates that we're seeing right now. That and, of course, all of the stronger and stronger hurricanes that are hitting the state of Florida have combined to create this, like, really, it's an insurance crisis.
--:-- Debra Acosta: I mean, some people are having to sell their homes because they can't afford the insurance on them. Because the state is becoming a riskier market, insurance premiums in Florida have exploded. People are paying as much as 400% more over the past five years.
--:-- Ryan Knudsen: It's forever transformed the way that we look at real estate in the state of Florida. The other thing, of course, that's driving insurance premiums up are the storms. Florida has always dealt with hurricanes, but the storms are now intensifying so rapidly that they're shocking to even the most seasoned Floridians.
--:-- Debra Acosta: I mean, there was a very well-known meteorologist in South Florida and Miami who was crying on air because he couldn't believe how quickly Hurricane Milton was intensifying in the Gulf. It's just an incredible, incredible, incredible hurricane.
--:-- Ryan Knudsen: It has dropped 50 millibars in 10 hours. I apologize. This is just horrific. Because they've never seen anything like it before. And, you know, Hurricane Helene didn't even hit the coast of Tampa. It just skirted past it, and it created this havoc.
--:-- Debra Acosta: For the past couple weeks, our colleague Debra has been driving up and down the Florida coast, surveying the damage wrought by Hurricanes Helene and Milton.
--:-- Ryan Knudsen: It's really tragic to see. It looks like, I don't know how to describe it. It's just, you know, hundreds of homes, all with appliances, furniture, mattresses, chunks of wall, debris, like mountains of this stuff in front of each of the homes. And it all smells, as you can imagine, terrible. It's like rotting pieces of people's lives.
--:-- Debra Acosta: In flood-ravaged communities, especially in the Tampa area, some people are second-guessing their decisions to buy there. Homes are going up for sale, but there's little interest, meaning owners are slashing prices multiple times. And still not getting offers.
--:-- Ryan Knudsen: In St. Petersburg, Deborah met a homeowner whose for sale sign was ripped off his lawn by rushing floodwaters.
--:-- Debra Acosta: As she spoke with people, Deborah heard the same thing over and over again. Selling a house in coastal Florida is becoming really, really hard. Which is so wild because just a few years ago, you had people outbidding each other for these homes and now you can even sell them for the same price.
--:-- Ryan Knudsen: And so what we're seeing is a flattening out of the market at the moment. And you know, there's a bit of a fear that there could be a price correction around the corner. And so we're waiting to see what happens. But yeah, things definitely look different than they did a few years back when everybody was excited to make their way down to Florida.
--:-- Debra Acosta: There's one other thing that's hurting Florida's real estate market, Interest rates. Across the country, mortgage rates are up to above 6%, double from where they were during the pandemic.
--:-- Ryan Knudsen: What is this going to mean for Florida if there are so many houses that are flooding like this and insurance premiums are so high that people can't afford it? What is it going to mean for the state?
--:-- Debra Acosta: You know, a lot of people in the middle class, unfortunately, have chosen to leave the state of Florida or have chosen to leave these coastal areas for more inland areas that don't flood as much.
--:-- Ryan Knudsen: So 85% of the homes in Dominique's neighborhood flooded. The ones that didn't flood are the brand new homes that were built really up high or on stilts for much more money than what Dominique paid for her home.
--:-- Debra Acosta: It's a totally different new housing stock. And it's a totally different new group of people that can afford to buy those or build those. And they're not, unfortunately, they're not teachers. Like Dominique.
--:-- Ryan Knudsen: Unfortunately, it's become unaffordable. It's become a situation where, you know, this dream that they thought that they had built for themselves is not the reality.
--:-- Debra Acosta: What does that say about who can afford to live in Florida? What we're seeing is people like Jeff Bezos, Ken Griffin, you know, hedge fund billionaire. That's the type of person that we're seeing come to Florida in droves.
--:-- Ryan Knudsen: And you see it in the census data. You know, the incomes of people that are moving to places like Miami are astronomical compared to those who are leaving.
--:-- Debra Acosta: The people who are leaving are all making middle-class salaries. Then they just can't afford to live in these areas anymore, unfortunately.
--:-- Ryan Knudsen: So Florida is sort of becoming a land for the rich. Yeah, I would say specifically in these coastal areas, like waterfront property is becoming definitely the enclave of the rich. It used to be attainable for retirees and others of modest incomes, but it's no longer the reality.
--:-- Debra Acosta: It's unfortunate, but it's becoming, you know, an area where only the rich can play.
--:-- Dominique Tomlinson: Dominique is now considering selling, but she doesn't expect anyone to buy her house. She thinks it's more likely that someone would just want to buy it for the land underneath.
--:-- Ryan Knudsen: I think Florida will always be here. And maybe it's, at this point, it's like maybe it's for wealthy people who can afford a second home to live in these coastal areas. And I think a lot of what's going to be left in, you know, communities like Shore Acres are the people who can afford to knock down their home and rebuild or can afford to finance lifting their home on their own.
--:-- Dominique Tomlinson: It's definitely sad to think about leaving here because I've built a community and I love my co-workers and my friends so it's definitely sad but I think it would be somewhere we would we would still you know try to visit as much as we could but we'll see if that's the direction we head in.
--:-- Ryan Knudsen: That's all for today. Monday, October 21st. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.
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