What is the cost of Living in Florida?
- Your move involves the sale of your current home and the purchase of a replacement residence in Florida.
- You will be living in Florida full-time and will not own a home in another state.
- You are retired, disabled or otherwise live on a modest fixed income.
- You will have to work for a living in Florida to pay your living expenses.
Why do I say this? Because Florida is not a clear low cost of living leader like it was in the last century. Prior to the year 2003 or so, you could move from just about any other state in the U.S. and expect to find lower housing cost, lower taxes and a lower cost of living overall. All of that has changed. Here’s a few examples:
- The cost of automobile registration, insurance, etc. may be higher
- The cost for water and sewer probably is higher
- The sales tax may be higher because Florida counties can tack onto the state sales tax rate
Steep Price Peaks and Valleys
The cost of living in Florida is far more unstable than most other U.S. states because the population and the economy of Florida is more unstable. For example, real estate prices in Florida fell by an average of 60% at the beginning of the “great recession” of 2008. If you were living in a home in Florida that was valued at $200,000 before the recession, the value dropped to about $80,000 shortly after.
If you took out a mortgage to buy that home, you would be still be paying the higher cost of living for a home worth far more than its value. That might be disturbing, but not necessarily a big deal, until you wanted or needed to sell. If you wanted (most people who move to Florida will move out) to sell at that point, you would have to write a big check to the bank, just to give your house away. If money is tight, the last thing you need is to take that kind of a loss or have a foreclosure on your credit record because you can’t write that check. Nobody who moves to Florida plans on moving out, but this is what happens to a high percentage of people.
You may be considering a move to Florida after seeing many articles that tout how low the cost of living in Florida is right now. Be careful because many of those articles are poorly researched and written by people who never lived in Florida and don’t know the true costs. Many of these write-ups are based solely on what real estate prices are TODAY. They don’t consider the cost of water and sewer which can be outrageous compared to elsewhere. In the state of Florida, real estate taxes are adjusted YEARLY based on value. Your fixed income or wages may allow you to comfortably pay the bills now, based on the low real estate taxes and insurance that were on the home when you bought it. What happens to that affordability as your real estate taxes and insurance rise EVERY YEAR as home prices go up? I have sold many homes in Florida for people who could no longer afford the real estate taxes.
Cost of Living in Florida Wildcard Dangers
After the record damage in Florida from hurricanes in the last decade, homeowners insurance skyrocketed. Rates more than doubled or tripled for some homeowners. I again sold many homes for people who could not afford the vastly higher premiums. Suddenly insurance companies wouldn’t touch many properties. They became uninsurable until the state formed an insurance company of last resort for homeowners that had no where else to turn. That state backed entity is the largest insurer in Florida today and even Florida’s governor has said it may not be able to pay homeowners promised insurance coverage if a powerful hurricane hits. That home you buy in Florida today could become a place you can’t afford next year if Florida’s lucky streak of 8 record years without a major hurricane hit ends during the next 6 month hurricane season.
Uncertain Future Costs of Insurance(s)
In many parts of Florida if you use a mortgage to purchase a home, you will be forced to carry homeowners, flood, wind, sinkhole and possible other insurance. Events such as the appearance of yet another sinkhole in November 2013 that is swallowing homes that could lead to banks requiring sinkhole insurance in areas where it wasn’t required before. It could also lead to an increase in sinkhole insurance rates for people who already pay it. That could force some people from their homes because they can no longer afford the combined rising cost of insurance in Florida.
Why should you consider flood insurance or other insurance, even if it’s not required? Because most insurance companies won’t pay for damage caused by “flooding” under a regular homeowners insurance policy. Your homeowners policy may cover damage to your home but not from a flood, hurricane winds, sinkholes, etc. The more homes that get swallowed by sinkholes, the more areas it will be required in order to finance a property and the higher the cost will go. See the November 2013 sinkhole story in the video below.
The Cost of Living in Florida, the Bottom-line
Moving to Florida if you’re well off financially with a high income
The absence of a state income tax many give the state of Florida an advantage over all others. If you don’t invest a high percentage of your assets in a Florida home, you probably shouldn’t worry too much about the cost of living in Florida with the possible exception of flood insurance reform. If you’ve ever seen people while watching the news who live in a flood zone near a body of water who have lost everything from flooding but swear they will rebuild yet again, what you’re seeing is the taxpayer bailing these people out through the federal flood insurance program. When they reform this program because the taxpayer piggyback is broke, these people will be forced to pay flood insurance premiums that reflect the real risk. The real risk is extremely high and once the rates reflect this, many flood zone home owners won’t be able to pay. FYI, most people live along the coast in Florida and many entire communities are in a flood zone. In many areas you can’t buy a home that isn’t in a flood zone.
Moving to Florida and working for a living or living on a modest fixed living.
People thinking of moving to Florida because they’ve saw someone touting the low cost of living in Florida, proceed with caution because the cost of living in Florida can change faster than just about anywhere else. If you will be working for a living, sure you won’t have to pay a state income tax but you almost certainly will earning less than doing the same job in the state you moved from.
The cost of living in Florida is determined mainly by housing costs. Move to Florida after a housing bust and whether you buy or rent you will probably experience a lower cost of living than your previous home state. The problem is that because they are so many people moving in and out, the state experiences higher highs and lower lows when it comes to the economy and housing. If you move to Florida today to enjoy a low cost of living, you may not be able to afford it in 3 years. The days of a perpetual low cost of living in Florida are over for good. The Florida Move Guide does explain how to lower the risk of rising costs while living in Florida.