Ripple Effect of Home Insurance Crisis on Real Estate
WASHINGTON (SOA) — The impact of extreme weather events is being felt by homes in high-risk disaster areas, but the situation runs deeper. Unaffordable home insurance is beginning to create a ripple effect in some real estate markets, threatening to make homeownership unaffordable for many.
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 examines whether growing instability in the home insurance market could spell trouble for home sales.
Home Sales Feeling the Impact
Residents in a North Redington Beach, Florida condo complex watched in dismay as waves from Hurricane Milton’s storm surge surged into their building. These were two in a series of back-to-back hurricanes that hit the southeast last fall, leaving a trail of destruction and mounting anxiety over home insurance.
Escalating insurance rates and policy non-renewals in Florida are making it harder to sell homes, according to Vince Arcuri, a longtime Tampa Bay Real Estate Agent. “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.”
S&P Global Market Intelligence’s RateWatch application reports that Florida has seen a 54-percent increase in home insurance rates over the past five years. Furthermore, a recent Senate Budget Committee report on home insurance named Florida the number one state in the country for policy non-renewals.
U.S. Senator Sheldon Whitehouse, D-R.I., is raising concern that the unaffordability of home insurance could 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, motioning his hand downward.
Whitehouse, who chaired the Senate Budget Committee for the past two years, noted that high-risk states like Florida, California, North Carolina, and Louisiana are leading the way in terms of skyrocketing home insurance and non-renewals, but he emphasized that these states are far from alone.
In 2024, 33 states from coast to coast saw double-digit rate increases for the second year in a row. This includes many interior states experiencing more frequent and intense storms, such as Kentucky and Tennessee, which were recently hit with historic, catastrophic flooding.
“If you’re a homeowner and your property just became uninsurable, it has likely also become un-mortgageable,” Whitehouse said. He explains that if Americans can’t find affordable insurance, banks won’t lend them money to buy homes.
More People Living in Harm’s Way
Arcuri notes that the effect is already visible in Florida, where property values are being impacted as people lower the prices of their homes to compensate for the escalation in insurance costs. However, according to the Insurance Information Institute, more people are living in high-risk areas like Texas, Florida, Virginia, and the Carolinas, despite rising insurance costs.
“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 Mark Friedlander, Insurance Information Institute Corporate Communications Director. “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 acknowledges this, but with Tampa Bay facing its highest inventory of homes for sale in 25 years, he 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.”
