Jan 2, 2025
There’s passionate debate about how to solve America’s ongoing housing crisis, much of which revolves around mortgage rates, zoning issues, immigration and construction. However, billionaire entrepreneur and investor Mark Cuban believes the biggest issue is being overlooked by the public.
“Home insurance in areas hit by repetitive disasters is going to be the number one housing affordability issue over the next 4 years. And possibly going into the midterms. More so than interest rates,” he said in a recent post on Bluesky. “Florida in particular is going to have huge problems.”
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Here’s why home insurance could be a pivotal problem for the national housing market in the years ahead.
Home insurance crisis
Home insurance rates have surged, driven primarily by two key factors: inflation and climate change.
The cost of labor and building materials for homes has risen rapidly since the pandemic. Although the price of lumber has recovered, the National Association of Home Builders says things like drywall, concrete and steel mill products are still selling at elevated prices.
For those with a replacement cost insurance policy, it can cost the insurer more to cover the cost of replacing your home, without taking depreciation into account. The risk this presents will be reflected in your premium.
While homes are more expensive to replace, they’re also more prone to damage because of climate change.
Severe floods, wildfires and hurricanes have become more frequent, which must be factored into the underwriting of property insurance. As a result, home insurance rates have surged 40% faster than inflation between 2017 and 2022, according to the Consumer Federation of America (CFA).
In fact, major insurers like Farmers and Progressive have either left states like Florida or limited their exposure to these disaster-prone regions. And based on CFA data from 2018 to 2022, 10% of Florida homeowners have no property insurance at all.
Homeowners and potential homebuyers should be aware of how risky it is to go without coverage and prepare for the cost of adequate protection.
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3 ways to protect yourself
If you haven’t purchased a property yet, considering the climate risk of any location you seek to move to is worth your while. Redfin offers a comprehensive climate risk score while the Federal Emergency Management Agency offers flood maps to help you assess risk.
If you already own a high-risk property, consider investing in resilience measures such as securing shutters and roofs, elevating structures in flood-prone areas and using fire-resistant materials in wildfire zones. Doing so can get you a discount on your premium in Florida.
Finally, if you can’t afford insurance, look into your state-backed insurer of last resort. California’s FAIR Plan or Florida’s Citizens Property Insurance Corporation could be your ultimate safety net if you can’t find private insurance elsewhere.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
