Real Estate Ripple Effect of Home Insurance Crisis
Homes in high-risk disaster areas are grappling with the consequences of extreme weather events and, increasingly, the crisis in home insurance. Unaffordable home insurance is beginning to have a ripple effect on some real estate markets, potentially destabilizing home sales.
Despite dramatic increases in home insurance premiums, more people are living in high-risk disaster areas, according to the Insurance Information Institute. (SOA)
Residents at a condo complex in North Redington Beach, Florida, witnessed waves from Hurricane Milton surge into their building. These events, and others across the southeast, have led to growing anxiety over home insurance and record rate increases in the area.
Longtime Tampa Bay Real Estate Agent Vince Arcuri highlighted the impact of these escalating rates, stating that they are making it harder to sell homes. “Unequivocally, yes,” Arcuri said. “People are not able to qualify for a mortgage because of the skyrocketing insurance, which takes them out of the market.”
Florida has experienced a 54-percent increase in home insurance rates over the past five years, according to S&P Global Market Intelligence’s RateWatch application. A recent Senate Budget Committee report also found Florida was the top state in the country for policy non-renewals.
U.S. Senator Sheldon Whitehouse, D-R.I., is raising concerns about the ripple effect of unaffordable home insurance, potentially destabilizing the national housing market. “It’s extremely dire,” Whitehouse commented. “If the mortgages aren’t there because the insurance isn’t there, (phew) the property values crash,” he added.
Whitehouse, former chair of the Senate Budget Committee, noted that high-risk states such as Florida, California, North Carolina, and Louisiana are leading the way in soaring home insurance costs and non-renewals. In 2024, 33 states across the country saw double-digit rate increases for the second year in a row, including interior states like Kentucky and Tennessee, which have recently experienced catastrophic flooding.
Whitehouse explained that if Americans cannot find affordable insurance, banks will not lend them money to purchase homes. “If you’re a homeowner and your property just became uninsurable, it has likely also become un-mortgageable,” he said.
In Florida, Arcuri is already seeing the impact. “You’re starting to see it impact the (property) value because it’s all about the mortgage payment. So, you’re having to lower the price of the home to make up for this escalation in insurance,” Arcuri said.
Despite rising insurance costs, the Insurance Information Institute reports that more people are living in high-risk areas, including Texas, Florida, Virginia, and the Carolinas. “People want to live near the coast. They want to be walking distance or short driving distance to the beach. Sounds lovely. It’s not. It is extreme risk,” said Insurance Information Institute Corporate Communications Director Mark Friedlander. Homeowners need to expect to pay more in those areas.
Arcuri worries that the American dream of homeownership is slipping away. “It’s getting to be a rich man’s game. I will say that. It’s getting increasingly unaffordable for first-time home buyers; it’s really taken them out of the market.”
