Flood insurance premiums are jumping for houses in federally designated flood hazard areas. And on the South Shore of Long Island, that added cost of home ownership is having an impact on home prices, driving down the value of houses more at risk for flooding. Newsday covered the story on November 15 (for the full Newsday report, see: "LI South Shore market split," by Maura McDermott).
"Rising flood insurance costs and the aftermath of Sandy have created a two-tiered housing market on Long Island's South Shore," Newsday reports. "Coastal homes at lower risk of flooding—because they are elevated, on high ground or right outside the flood zone—command a premium, while homes at higher risk are less in demand, brokers say. The disparity is due to the greater cost of insurance for flood-prone homes, as well as the higher probability of flooding at lower elevations, brokers and other experts said."
Paying for an "elevation certificate"—a survey report that documents the home's elevation with respect to the Base Flood Elevation (BFE) at the site—adds a transaction cost to purchasing the house, reports Newsday. But the certificate also provides information that can affect whether a deal is even done. One homeowner interviewed by Newsday withdrew her offer on a house after discovering that flood insurance premiums on the structure would be $4,000 a year. That buyer walked away; others, Newsday reports, are expecting a discount of about 15% on the purchase price of any house subject to a flood risk.