Is it Still A Bubble If It Only Pops in Certain Areas?

Dave Burt is an investor who became famous as one of the investors who shorted the subprime
mortgage market more than 15 years ago. In a May 28 interview on Marketplace, he said that he
believes a smaller but still significant housing crisis is in the works. This time the crisis is being created by
the lack of insurability for 15-20% of the country’s homes. The increased occurrences of flooding,
wildfires, and extreme cold snaps have caused several insurers to pull out of major housing states like California, Florida and Texas. Nationwide, rates increased close to 20% between 2021-2023, with double digit increases predicted by Insurify this year in many states. The article points out the expected impact on housing with the insurance problem:

 Increased cost will lower buyers affordability;
 Push fixed income seniors from their homes;
 Push renters into a lower tier of housing with rents increasing to cover increasing landlord
 Significantly decrease the buyer pools for homes in flood and wildfire zones; 
 Increase distressed sales for homeowners unable to cover the multiple thousand dollar
increases with high mortgage costs and living expenses.

As Burt stated, I would expect there to be a race to the exit in some of these markets, and you know, some people will be stuck.

Auxiliary Dwelling Units Becoming a Thing:
One is five new home permits in California were built as an Auxiliary Dwelling Unit (ADU) in 2023. This
doubles the number from just three years prior in 2020 (that still saw a construction boom despite the
covid shut down in spring). The numbers were:

2020-21 8,479
2021-22 12,923
2022-23 20,174
2023-24 22,802

The number can expect to increase as the state and voters have created laws to strip local governments
of their power to restrict these units, according to Kate Telerico’s May 28 article for the Bay Area News
Group. State Assembly member Phil Ting (San Francisco) is proposing a bill that will allow homeowners
to sell an ADU as a separate unit from its parent parcel if local governments will allow. How this proposal
will take into account lot size minimums, engineering map cost for subdivisions, lender policies, and title
policies is yet to be seen.

Please give me a call at Premier Funding Network to answer any of your mortgage questions at 714-283-9900.