Interest rates and inventory shortages are not the only factors contributing to the unaffordability crisis in the US housing market. In addition to real estate taxes and escalating inflation, now major insurance carriers such as State Farm and Allstate are fleeing certain very popular housing markets such as California and Florida. Over the last 12 months it has been reported that home insurance rates have skyrocketed in the Sunshine State, sometimes reaching as high as $10,000 a year. These increases in Florida are due to the imminent and consistent catastrophic weather events, including hurricanes, that seem to plague the state.
And now California is experiencing another mass exodus of insurance carriers leaving the state due to the issues of fire and flood that have recently left many portions of the state susceptible to these events.
State Farm not only stopped accepting new applications for home insurance policies in California, but it is announcing that it will pause all homeowner’s condo and commercial insurance policies in California to protect current customers.
The reason they are citing is that there are actuarial grounds for such decisions. The other issue is that when such events occur, inflation has made rebuilds much more expensive and the carriers can no longer afford to withstand such policy claims.
Louisiana is another state that is having to deal with the shortage of home insurance carriers.
The consequence of these events is that not just new buyers but current homeowners are finding themselves scrambling to find affordable home insurance.
One Insurance Premium Increases 6X
In one specific case, the cost of home insurance went from $2,000 a year to $12,000 under Allstate insurance. The result of this insurance hike is that homeowners are having to move because the cost of living is making it prohibitive to their current budgets.
The increased insurance requests are not only hurting the homeowners should they stay, but if they choose to leave, these increased insurance costs are taking the potential list price of their house, should it go to market, down approximately 12%.
So now we are seeing a new trend that has never existed in modern real estate history: homeowners have to factor in the egregious cost of home insurance into their budgets, making such warm destinations, including California and Florida, to become prohibitive.
And in some cases, as is in California, some of the dangers due to wildfires are due to the rogue environmental decisions of the state governments in terms of their failure to maintain the health of the forests that surround such communities.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single-family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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