The impact of rising insurance premiums on the housing market

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A realtor is shaking hands with a family at the front door of a house.

Traditionally, factors such as interest rates, home inventory, home values and the state of the economy have been the main factors considered to impact the health of the housing market. However, there are two forgotten factors whose influence on the real estate market are exponentially growing: the cost and availability of homeowners insurance.

According to the Insurance Information Institute, premium rates rose 12.2% on average nationwide from 2017 to 2021. Coupled with rebuilding and replacement costs surging more than 50% during the pandemic, these rates are expected to increase even further. Markets like Florida and California that have been hard hit by natural disasters in recent years are expected to see even greater increases than the rest of the country. But no area is immune from climate change. We’re now beginning to see natural disasters drive rate increases beyond regions typically prone to natural disaster, according to a report by Axios, leading to dire financial situations for homeowners when coupled with other economic factors, such as inflation.

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With these rate increases, homeowners insurance impact on real estate shouldn’t be ignored. While mortgage rates are typically a primary consideration in a potential home buyer’s total budget, home insurance cost or availability is often not factored in until the very end of the home buying process. But with today’s rising premiums, doing so has caused some homebuyers to back out of the sale or stop shopping for a new home altogether due to affordability issues.

A lost sale affects all players involved. Real estate agents’ time spent helping prospective buyers tour properties could’ve been used elsewhere. The same goes for mortgage lenders, who spend considerable time and effort guiding homebuyers through the strenuous application processes. A jeopardized closing process also leaves title companies, attorneys and escrow agents equally vulnerable. Additionally, appraisers and inspectors are at risk of losing business if a sale falls through.

There is some good news: there are steps one can take to better prepare potential buyers for these costs early in the homebuying process as well as help them find adequate and affordable coverage that fits their needs.

  • Address home insurance at the start of the homebuying process – Considering insurance before finding and touring homes, doing inspections, or even writing an offer, enables potential home buyers to better estimate a home’s cost and pursue those within their budget upfront. Doing so increases the likelihood of potential buyers going through with a home purchase.
  • Provide insurance resources within the home buying process – Mortgage lenders, real estate agents and other industry stakeholders who can aid in the home insurance process will offer added value to their customers by connecting them with insurance professionals who can help them make educated coverage decisions. An omnichannel insurance platform like VIU by HUB that offers both a digital experience and informed advice from an advisory team makes it easy for home buyers to purchase the needed coverage with the benefits of choice, efficiency and price transparency.
  • Work with a personal insurance broker – A personal insurance broker’s value goes beyond the point of sale. As more and more insurance carriers are exiting markets, the neutral, personalized advice of a broker can help direct customers through their new options. Also, brokers are at the forefront of any market changes and can offer support to customers as any new challenges arise.

Given the many contributing factors to the state of the housing market, addressing homeowners insurance alone won’t lead to market stabilization. But companies that can enable customers to obtain solutions and simplify the process of finding affordable homeowners coverage for their customers could make huge strides ahead of their competitors.

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