Home Insurance Crisis Creates Real Estate Ripple Effect
WASHINGTON (SOA) — Homeowners in high-risk disaster areas are facing the consequences of more than just extreme weather. A new report reveals that unaffordable home insurance is beginning to destabilize certain real estate markets.
Despite dramatic increases in home insurance premiums, the Insurance Information Institute says more people are living in high-risk disaster areas. (SOA)
National investigative correspondent Angie Moreschi looks at whether the growing instability in the home insurance market could signal trouble for home sales.
Home Sales Feeling the Impact
Residents of a condo complex in North Redington Beach, Florida, watched in disbelief as storm surge from Hurricane Milton flooded their building. Like many others, they were left dealing with the aftermath of two back-to-back hurricanes that struck the southeast last fall. The extreme weather caused major destruction and led to increasing anxiety over home insurance. Florida homeowners have already seen record rate increases and policy non-renewals.
Longtime Tampa Bay Real Estate Agent Vince Arcuri explained to Spotlight on America that escalating insurance rates and non-renewals are making it harder to sell homes. “Unequivocally, yes,” Arcuri stated. “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 on home insurance also found that Florida had the highest number of policy non-renewals in the country.
U.S. Senator Sheldon Whitehouse, D-R.I., is concerned that the unaffordability of home insurance could cause a ripple effect and destabilize the housing market nationwide.
“It’s extremely dire,” Whitehouse told Spotlight. “If the mortgages aren’t there because the insurance isn’t there, (phew) the property values crash,” he said, gesturing downwards.
Whitehouse, who chaired the Senate Budget Committee for the past two years, said high-risk states like Florida, California, North Carolina, and Louisiana are leading the way when it comes to soaring home insurance costs and non-renewals. However, he points out that they are far from alone.
In 2024, 33 states across the country saw double-digit rate increases for the second year in a row. This includes many interior states that are experiencing more frequent and intense storms, such as Kentucky and Tennessee, which were recently hit with catastrophic flooding.
“If you’re a homeowner and your property just became uninsurable, it has likely also become un-mortgageable,” Whitehouse said. He clarifies that if Americans can’t find affordable insurance, banks won’t lend them money to buy homes.
More People Living in Harm’s Way
In Florida, Arcuri says the impact is already apparent. “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 explained.
Yet, according to the Insurance Information Institute, despite rising insurance costs, more people are choosing to live in high-risk areas such as 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. “As a homeowner, you’re going to own your risk if you want to live in those areas. What that means is expect to pay a lot more than the average American,” Friedlander added.
Arcuri agrees. However, as Tampa Bay faces its highest inventory of homes for sale in 25 years, he worries that the American dream of homeownership is becoming less attainable.
“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.”
