Rising Insurance Rates Could Make Home Buying Less Affordable
With high mortgage rates and rising prices increasing homebuying costs, growing insurance rates could push home affordability out of reach for even more people.
Homeowners insurance premiums jumped an average of 21% as of the spring, with average policy costs jumping to $1,754 a year. With mortgage rates approaching 8%, an additional nearly $150 a month for insurance could push homeownership out of the budget range for would-be homeowners.
“The link between the housing market and the insurance sector has never been more apparent,” said Travis Hodges, managing director at digital insurance platform VIU by HUB, in a statement. “The trajectory of new home sales directly shapes the market landscape and influences the demand for new homeowners insurance policies—an indispensable facet of property ownership.”
Premiums Expected to Rise
With insurance premiums expected to rise by an average of 9% this year, finding affordable coverage remains an important consideration for new homebuyers.
Many prospective homeowners fail to consider insurance costs until the end of the homebuying process, potentially causing their monthly payment to exceed their budget, Hodges said. That creates a domino effect that slows business for the industry’s mortgage lenders, real estate agents, and others.
“Addressing the escalating insurance rates is an urgent priority for achieving housing-market stability nationwide,” Hodges said.
Severe Weather Affects Premiums
As a result of severe weather events, home insurance premiums are increasing on 12 million properties due to flooding, 24 million due to wind damage, and 4.4 million due to the risk of wildfires.
Despite California’s recent announcement of its Fair Access to Insurance Requirements Plan, states across the country are increasingly facing similar challenges.
Additionally, new home sales surpassed expectations, indicating Americans are willing to purchase homes even as insurance costs rise.
In addition to saving consumers money, the process can be made easier for buyers and sellers by determining home insurance at the start of the homebuying process. Finding affordable, complete coverage can also be made easier by shopping through a broker with access to multiple insurance companies.
