Real Estate Crash thread

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Originally Posted by Conundrum

. No loans, not as many homes sold. Insurance actuaries forecast losses based on age and type of construction. Reaching the end of effective use is coming up on a lot of property. Lead and galvanized pipes leak at joints, rot in trusses, old leaky roofs, site drainage, aluminum wiring and other fire hazards in electrical systems, people leveraged and not being able to afford upkeep, doing work themselves without knowledge so probably not to code, all sorts of aging property issues that become predictable losses. Nuclear verdicts, monocoque car frames that will total an $80k car in an accident that was purchased on a 7 or 8 year note.

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this is pretty much what I can't get over when it comes to real estate and it blows my mind

I pretty much tell people that everything in a home windows siding roof doors appliances hvac all has a lifespan of 25 years and then it's done toast

distressed or property that has not been maintained (we are not even talking about updated for taste) stuff is selling for top dollar it seems people are too stupid to realized that the home needs 100k in basic work
a house maintained and updated sells for 625k the shit hole next door same floor plan sq ft etc hasn't been maintained furnace is 40 years old and holding on by a thread roof is orginal and it has aluminum windows and that guy things he can get 575k cause well the house next door went for 625k sure enough some dumb fuck comes by and says that works.............

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Originally Posted by AdironRider

I don't really see this as an HOA fee issue.

Did these people really expect to not have to do maintenance on a 40+ year old building? This seems to be a detached from reality issue.

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the people quoted in the article are the same people who may have lived in a single family home for 30 years and not done a single thing unless water was pouring in through the roof or the heat or hot water went out

so many hoa's get run into the ground because no one wants to spend money

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Originally Posted by AdironRider

I think the salesman gets basically the equivalent of the first 6 months of premiums, give or take. I believe it is on a slightly different payment schedule but runs out after a year or three, then you see them come crawling back around to "reassess your risk" and basically sell you an entirely new policy.

That speaks more to the universal sleaziness of salesmen more than the value of the product though.

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Huh, I didn't realize that.

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Originally Posted by Conundrum

Too lazy to find a better one?

They’re out there. That’s about $3-4k agency revenue. If your agent is independent, they’re somewhere between 30-50% overhead. If they’re working for one of the big houses, the agent is getting probably 25% of that $3-4k. The independent is probably limited on company appointments so not many options to present to you. The big house agent doesn’t make enough on the deal ($600-700 after tax) to either interrupt his tee time, put your renewal in front of those bigger premiums ($25k may seem like a lot to you but is under the threshold most brokers with true insurance expertise and market access will care about), or the big shop doesn’t even pay the agent because they have minimum premiums to stay out of there small business units. Plus, insurance companies are assholes to deal with right now so your agent is burnt out-a lot of them are.

My advice if you want to spend the time looking for a new agent is find someone a bit younger who has been at it 3-5 years with some older agents back at the bigger agency (look at their website or ask the agent if they feel they have good mentorship). Those type of folks will still hustle for you, have decent market access, and some experienced people to talk to when things get tricky.

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Maybe a bit lazy, sure, but also too busy to shop around simply because the guy annoys me. I'm annoyed by people who suck at their job, the fact they don't care they suck, and they get paid handsomely - I couldn't switch plans and save money. Now I think about it - I also caught him being dishonest last year withholding important info before I signed up for another year.

I absolutely realize $25k is nothing, and that's split up between many insurance companies so no one entity is even getting 25k. So it's small apples but it doesn't mean I should be treated like shit IMO. I appreciate your advice.

I agree with you-you should absolutely be treated better. The industry I'm in has a deservedly bad rep on the sales side. I do hope there are some of us that show up and provide value. Plus making money doing this is easier when there are people like your guy. One thing to consider is depending on your insurance companies, you might be able to switch agents without changing carriers and send a shot across his bow if you wanted to.

AdironRider is correct for some direct writer insurance companies like Federated, Farmers, etc with varying comp models. Most independent agencies are going to get between 10-15% of the premium annually. How that is split with the agent-agency varies but it is residual and every year so they should continue to work for you.

I've been really happy with Amica and I like their direct writer model.

I had a >$30k hail claim six months into ownership of my first house and they were great to work with.

I use them for home (including earthquake), auto and umbrella. Their service has been exceptional.

Good company when the cycle is good. Their performance will be regional and if I were you, I'd ride it as long as they let you. Here is some info that supports some of my trepidation with certain lines of insurance business. Amica has a great rating right now and a potential downgrade coming but with the downgrade will be still be a highly rated company.

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The negative outlooks for Amica Mutual Group reflect the decline in its balance sheet strength, specifically a deterioration in risk-adjusted capitalization in recent years. Increased loss costs in both the auto and homeowner’s line of business have driven substantial underwriting losses in 2022 and 2023, which has significantly impacted the group’s surplus position and overall liquidity. Nonetheless, the group’s liquidity profile remains supported by Federal Home Loan Bank borrowing capacity, reinsurance and portfolio cash flow. Additionally, Amica Mutual Group’s results rely heavily on net investment income and realized capital gains, which have contributed collectively to positive net earnings in most years. However, this benefit was muted in 2022 and 2023 due to the turbulent investment markets and rapid increases in interest rates, which caused underwriting losses to outpace investment earnings.

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Can't really tell what happens next but looks like fed rate cuts are being pushed out past the summer. Might be a tough year for insurance companies making money on the float. This is worth monitoring:

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A leading credit rating firm said Monday that U.S. insurance companies that sell homeowners policies face a future of major losses — prompting the firm to assign the homeowners sector a “negative” outlook for the first time.

AM Best said it dropped its outlook for the home insurance sector from “stable” to "negative" in large part because of “elevated natural catastrophes” and “more frequent” weather-related events that cause major home damage.

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Laymens terms, they'll pull out of the worst performing markets and try to right the ship by raising premiums in cusp markets. Performing markets should be stableish. So if you live in a newer home, without threat of fire, flood, wind, hail, or earth movement, your premiums should be pretty predictable.

This will reduce the options and raise pricing in many locations.

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Originally Posted by Conundrum

FEMA?

https://www.fema.gov/fact-sheet/indi...eholds-program

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This is predicated on the event being classified as a "disaster" which is subject to optics/politics. Not reliable IMO.

Agreed. Just saying the government is already stepping in where the private markets are not and private property now becomes a tax payer burden. We'll see more of it unless the weather calms down.

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Originally Posted by Conundrum

So if you live in a newer home, without threat of fire, flood, wind, hail, or earth movement, your premiums should be pretty predictable.

This will reduce the options and raise pricing in many locations.

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Don't forget ice storms and unusually cold weather (many burst pipes in Spokane this winter even though the lows were only around zero). Is there anywhere in the US that's free from all that?

Good point. Haven't seen insurance companies feather brakes on those yet but have seen requirements for auto leak detectors.

My insurance co is covering my roof (just about 20y after they covered my roof the 1st time) due to a couple gnarly hailstorms last summer.

I'm getting stone-coated steel this time around. My mate that is an actuary in the industry said that there is a *significant* premium discount with a hail-proof roof.

I just don't ever want to deal with roof damage again...

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Originally Posted by dan_pdx

Don't forget ice storms and unusually cold weather (many burst pipes in Spokane this winter even though the lows were only around zero). Is there anywhere in the US that's free from all that?

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Yes, but our prices are crazy.

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Originally Posted by liv2ski

Yes, but our prices are crazy.

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Isn't wildfire an issue down yonder?

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Originally Posted by liv2ski

Yes, but our prices are crazy.

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Don't you have earthquakes to worry about?

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Originally Posted by Toadman

Don't you have earthquakes to worry about?

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Earthquake is separate and an addition. Not required by lenders. I think overkill if you have a modern wood structure and don't live close to a fault. I would buy it if I lived in Seattle, but never have in San Diego.

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Originally Posted by skaredshtles

Isn't wildfire an issue down yonder?

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My house is across the street from large open space area, and between the street and my place is a HOA green space with Eucalyptus trees. Not only are the trees messy, I worry about those trees tipping over on the house or being a fire risk. I'm not sure how insurance companies define high fire risk, but I'm in it.

Also doesn't help that San Diego has had two huge fires, one thanks to a clown from LA: https://en.wikipedia.org/wiki/Cedar_Fire and second thanks to the shitty local power company: https://en.wikipedia.org/wiki/Witch_Fire

I'm amazed more places in the Western US are not having issues with fire insurance, maybe because those cities and towns haven't had much building loss yet. All it would take is the wind going the wrong direction in a lot of places I have seen.

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Originally Posted by Toadman

Don't you have earthquakes to worry about?

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I have lived in San Diego County for 45 years and never felt a big one like I did in LA county as a kid.

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Originally Posted by skaredshtles

Isn't wildfire an issue down yonder?

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On the island?

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Originally Posted by 406

Earthquake is separate and an addition. Not required by lenders. I think overkill if you have a modern wood structure and don't live close to a fault. I would buy it if I lived in Seattle, but never have in San Diego.

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I insisted on EQ for a bit until I realized if the big Cascadia hit that coverage would do nothing.

^^^ha, yeah, good point

I have it after seeing two earthquakes in the San Fernando valley area. Easily hundreds of thousands of dollars in damage to many many homes. Really not a bad idea in CA and I don't remember the premiums being too crazy.

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Originally Posted by Hood26

I insisted on EQ for a bit until I realized if the big Cascadia hit that coverage would do nothing.

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Why? Aren’t almost all those insurers admitted and backed by the state, and by extension the federal government?

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Originally Posted by liv2ski

I have it after seeing two earthquakes in the San Fernando valley area. Easily hundreds of thousands of dollars in damage to many many homes. Really not a bad idea in CA and I don't remember the premiums being too crazy.

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They aren’t but standard policies come with a 15% TIV (total insured value). So if you have a $1M policy you have a $150k deductible.

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Originally Posted by Conundrum

How old or what condition was the roof in? Probably a good move to not tip off the insurance company. They are using drones and pulling permits to check this stuff. If your buildings are ending the lifespan of the roofs, would make sense for the board to start bidding replacement. And for that ski in ski out, is there a pending cap ex assessment coming in addition to insurance.

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Well, it's a bit of a long story with some fake dormers that were improperly installed 20 years ago and the leaks started when they were removed. Oh, and Vail was managing our HOA and paid the contractor who was supposed to remove them so of course he split after getting paid before the work was complete. Regardless, the roof is now new as of last summer.

The ski in ski out place is running close to $2K a month because their insurance was dropped, and it's ready for some serious updates, easily $100K. That's a tough sell when you add current interest rates on top of it. I'm glad it isn't my listing.

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Originally Posted by neufox47

They aren’t but standard policies come with a 15% TIV (total insured value). So if you have a $1M policy you have a $150k deductible.

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Pretty sure I have the 5% deductible. My opinion on insurance is if I have it, I will never need it, if I don't, I am courting disaster.