Real Estate Ripple Effect of Home Insurance Crisis
WASHINGTON (SOA) — The escalating costs of home insurance are creating a ripple effect, significantly impacting real estate markets, particularly in areas prone to natural disasters. Spotlight on America’s investigations reveal that unaffordable home insurance is becoming a major challenge in several real estate markets, raising concerns about the stability of home sales and property values.
Despite dramatic increases in home insurance premiums, the Insurance Information Institute says more people are living in high-risk disaster areas. (SOA)
The impact is evident in places like North Redington Beach, Florida, where residents of a condo complex watched in disbelief as the storm surge from Hurricane Milton inundated their building. These communities, still recovering from back-to-back hurricanes, are grappling with not only the physical destruction but also the escalating cost and availability of home insurance.
Real estate agent Vince Arcuri, a longtime professional in the Tampa Bay area, notes that the increasing costs and non-renewals of insurance policies are severely impacting sales. “Unequivocally, yes. People are not able to qualify for a mortgage because of the skyrocketing insurance, which takes them out of the market,” Arcuri stated.
Florida has experienced a 54% increase in home insurance rates over the past five years, according to S&P Global Market Intelligence’s RateWatch application. Further, a recent Senate Budget Committee report singled out Florida, designating it as having the highest rate of policy non-renewals in the nation.
U.S. Senator Sheldon Whitehouse, D-R.I., expresses concern that the unaffordability of home insurance could destabilize the entire housing market. He warns that the absence of affordable insurance can lead to mortgage failures and a subsequent decline in property values.
“It’s extremely dire,” Whitehouse said. “If the mortgages aren’t there because the insurance isn’t there, (phew) the property values crash,” he said, motioning his hand downward.
Whitehouse, who chaired the Senate Budget Committee for the past two years, emphasized that high-risk states such as Florida, California, North Carolina, and Louisiana are seeing the sharpest rises in insurance costs and non-renewals, but they are not alone. In 2024, 33 states across the country saw double-digit rate increases for the second consecutive year, including interior states regularly hit by severe storms and flooding.
“If you’re a homeowner and your property just became uninsurable, it has likely also become un-mortgageable,” Whitehouse explained, adding that if Americans cannot secure affordable insurance, banks will not offer them loans to purchase homes.
In Florida, Arcuri is witnessing the impact firsthand. “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,” he said.
According to the Insurance Information Institute, despite rising costs, a growing number of people are still choosing to live in high-risk areas, including Texas, Florida, Virginia, and the Carolinas. Mark Friedlander, Insurance Information Institute Corporate Communications Director, observed, “People want to live near the coast… It is extreme risk… What that means is expect to pay a lot more than the average American.”
As the Tampa Bay area faces its highest inventory of homes for sale in 25 years, Arcuri is concerned that the dream of homeownership is becoming increasingly difficult to realize. “It’s getting to be a rich man’s game. It’s getting increasingly unaffordable for first-time home buyers; it’s really taken them out of the market,” he stated.
