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.

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.

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

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