U.S. News

Why do people keep paying for increasingly expensive houses in obviously risky coastal areas? A recent piece in the Tampa Bay Times ("Investors snapped up Tampa Bay homes damaged by Hurricanes Helene and Milton") by Rebecca Liebson and Teghan Simonton sticks with me. It's a cycle: Despairing owners of damaged houses, overwhelmed and underinsured, sell out; speculators buy, then quickly transfer to house-flippers; flippers quickly renovate (or don't), then rent or sell at higher prices to the next set of people who can't wait to get into the market.

The whole thing is driven by buyers' desires to live in precarious coastal locations. That desire appears unconstrained, and it seems that nothing will diminish it other than perhaps a series of disasters in short order that make life acutely uncomfortable. And even that might not be enough. Until there is no land left under a house for it to stand on, someone will buy it—and someone else stands ready to make money from the sale. Laws and policies systematically planning for decommissioning of public infrastructure (sewer, water, roads) over several years, together with well-resourced buyout offers accompanied by wraparound relocation services, could change this picture. Until then, the cycle will grind on.

Distressed properties all over Florida and up and down the East Coast can be a goldmine for investors. Along the Jersey Shore, essentially unconstrained speculation and development since 2012's Hurricane Sandy has led to explosive growth in very expensive homes.

Look, making money is what developers and speculators do. It makes sense that, left to their own devices, they buy cheap and sell for much more. But why do buyers keep showing up? There's a telling quote from Florida economist Brad O'Connor in the Tampa Bay article:

"We always worry that there's going to be a stigma put on Florida every time we have a bad hurricane, and it just doesn't seem to materialize. People still want to move here. People still want to live in paradise."