This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Sandy's Cost Legacy Is Strain on Middle-Income Owners

In some cases, homeowners may see their taxes go up to fund rebuilding efforts.

A new law passed by Congress last year essentially ends subsidies and ensures flood insurance rates more accurately reflect the real risk of flooding. Premiums for businesses, secondary home owners and those whose properties have sustained severe repetitive losses are likely to rise by 25% annually for the next five years in a transition to full market rates. For primary residences, the premiums stay intact but if a current policy lapses or the home is sold, the higher premiums kick in, which means these homes are going to be harder to sell.

There is also the chance that a remapping of flood zones puts your home at a higher risk of flooding, subjecting you to a higher premium.

If you factoring in the cost of protection such events, the cost of homeownership in these regions is a lot more expensive than people estimate.

Must Read: Ryder System Takes Over #47 Spot From Honeywell International

Eroded Market Landscape

Sales activity has already slowed considerably in areas worst hit by the storm. Median sales price in Rockaway, Queens fell 10.7% in the third quarter to $375,000 from a year earlier, according to the quarterly survey of residential sales by Douglas Elliman.

The number of sales fell 52.7% to 44 in the third quarter of 2013 from 93 a year earlier.

Activity may not stay this depressed for long, according to Jonathan Miller, president and CEO of Miller Samuel, a real estate appraisal and consulting firm and author of the report. The stigma will eventually wear off. But affordability of these homes might decline.

"The byproduct of the storm is there is this additional layer of costs outside of principal and interest that could hold back or temper growth in these areas," says Miller.

Miller sees the impact of the rising cost of homeownership hitting the middle- and lower-income homeowners disproportionately. He expects the decreasing affordability will likely change the residential composition of these neighborhoods, shifting the mix toward higher-priced homes and richer homeowners better able to absorb the rising costs.

And with an acute shortage of affordable homes for sale, there could be more multi-family development along the waterfront to cater to demand, according to Miller.

But for middle-income and lower-income homebuyers, a home by the beach may not be within reach.

-- Written by Shanthi Bharatwaj New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $119.08 1.10%
FB $106.30 -0.61%
GOOG $749.26 -0.89%
TSLA $218.25 0.23%
YHOO $32.81 -1.60%


Chart of I:DJI
DOW 17,812.19 +19.51 0.11%
S&P 500 2,089.14 +2.55 0.12%
NASDAQ 5,102.8080 +0.33 0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs