Higher flood-insurance rates may swamp owners

FLOODING THE MARKET: Susan Arnold, Rhode Island Association of Realtors CEO, says people are being cautious about new flood-insurance premiums, but it’s not having a chilling effect in Rhode Island. / COURTESY R.I. ASSOC. OF REALTORS
FLOODING THE MARKET: Susan Arnold, Rhode Island Association of Realtors CEO, says people are being cautious about new flood-insurance premiums, but it’s not having a chilling effect in Rhode Island. / COURTESY R.I. ASSOC. OF REALTORS

The odd hours and unexpected demands of a real estate agent mean the job is not for everyone, even those with a passion for property. For Susan Arnold, having to respond to a client call the night before her wedding convinced her to look for more predictable work and she found it in corporate purchasing with Pratt & Whitney. But after night school produced a law degree, Arnold was drawn back to real estate, first as legal counsel and eventually CEO of the Rhode Island Association of Realtors, where her combination of corporate, legal and real estate experience was a good fit. Now in her second decade with the Realtors group, Arnold is trying to help her members negotiate challenges like the government shutdown and changes to the National Flood Insurance Program. She says flood insurance in particular – with new maps and the phasing out of subsidized rates for old homes – has caused significant anxiety in the housing market.

PBN: Are buyers, sellers and agents coming to grips with these new flood-insurance rules or is it still chaotic?
ARNOLD: We are in transition. We are desperately trying to get more information so we can give it to clients. These are not straight-line changes and each piece does not fit together neatly. We had a survey collecting data for Sen. [Jack] Reed [D-R.I.] because he is studying the rollout of the program and affordability to the average homeowner. [The Federal Emergency Management Agency] never completed its affordability study to see how many transactions have been affected and how many properties were previously in another zone and paying higher rates. Anecdotally we have heard the highest rates are $49,000 per year. That will have a big impact on the value and affordability of those properties. We want to know which homes this is hitting the hardest, modest or most expensive. Right now it seems to be across the board. Decrease in value of property could be as little as $5,000 and as much as $100,000.

PBN: Is it having a chilling effect on the market in some places?
ARNOLD: I think people are cautious but they don’t want to miss this window of opportunity to buy a home when interest rates are still remarkably low. We don’t have a shortage of inventory in this state like other places nearby [such as] Boston. We are not facing that yet. Buyers are looking for good deals and have eyes wide open. … So far we haven’t seen that this has been reflected at all in sales.

PBN: The federal government plans on going further with these flood-insurance changes – raising rates for primary residences along with businesses and second houses. What do you see on the horizon?
ARNOLD: I am not sure, because part of the country is already fully implemented. There are pieces that don’t interlock well. There is one piece, which is the new flood maps, which were I live just came out on Oct. 16. There has been some talk with Sen. Reed’s office that as part of any further budget conversation they might have a moratorium on some of these map changes until they have a better idea on affordability. … I would really love to see an affordability study before we push people out of their houses because they cannot afford the premium.

PBN: Are there any particular areas of the state being hit harder than others?
ARNOLD: Anything that flooded in 2010 is on record as having a flood problem and that affected a large part of the state. That’s why I keep saying this is not just a coastal issue. There has always been flood insurance along the coast but not insurance that totally reflected the risk. Now there will be premiums that cover the risk whether you are inland [or] near a wetland or river.

PBN: Interest rates have jumped around a bit lately and appear to be on the way up over the long term. Is that slowing down the market here?
ARNOLD: Everyone wants to time the market perfectly, but I don’t know if we will ever see 3 percent interest rates again. People have to be mindful. When I was selling real estate, 15 percent to 18 percent was the rate. [So] 4.25 percent to 4.50 percent is excellent. Six percent and 7 percent is excellent. It is a mindset.

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PBN: You just held an event for members and had some national real estate folks speak. What do they think of the Rhode Island market from the outside?
ARNOLD: The National Association of Realtors Chief Economist Lawrence Yun was speaking about the general direction of real estate and is saying he expects the market to be strong and increasing for four out of the next five years.
PBN: The association recently launched a commercial MLS database. How is that going?
ARNOLD: It is going well. It is called the Commercial Information Exchange and it is the first opportunity that Rhode Island brokers have had to share with other brokers here or across the country who are looking for data and looking to move people into Rhode Island. … Because homeownership has fallen 5 percent since the bubble and more people are forced to rent and they need a place to find their rental. We have a lot of agents getting involved in rentals and they are going to be able to use it to locate rentals. •

INTERVIEW
Susan Arnold
POSITION: CEO, Rhode Island Association of Realtors
BACKGROUND: Arnold became a real estate agent after college, but the unusual demands of the job prompted a shift to corporate purchasing and then law school. Her law skills got her a job as the Rhode Island Association of Realtors’ legal counsel in 1994 and she’s been there since.
EDUCATION: Bachelor’s in English and Education from Tufts University in 1972; Law degree from Suffolk University Law School in 1992
FIRST JOB: Paper route
RESIDENCE: South Kingstown
AGE: 62

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