FOX Business Real Estate correspondent Katrina Campins talks about rising home insurance rates on “The Bottom Line.”
Astronomical increases in mortgage rates and skyrocketing home prices over the past year have put a key tenet of the American Dream out of reach for millions of families.
Today, there’s another hurdle to homeownership: rising home insurance costs.
Since 2019, Home Insurance New data released by Lending Tree shows that interest rates in the United States have risen 37.8% to roughly $2,478 per year, significantly faster than the overall 24% increase in the Consumer Price Index recorded over the same period.
Rising home insurance costs could force families to move from 10 states
A waterfront home near the Naples Pier in Naples, Florida on February 13. (Lisette Morales McCabe/Bloomberg via Getty Images/Getty Images)
The researchers blame a variety of factors for the price hikes, including weather disasters, rising home prices and rising home repair costs due to inflation increasing the cost of building materials.
“Insurance companies are having to repair more homes, and it’s more expensive per home to rebuild than it was five years ago,” says Rob Butt, a home insurance expert at LendingTree. “When it costs insurers more to pay out claims, they raise our premiums. This impacts the premiums of just about everyone, including people who haven’t been directly affected by natural disasters, or at least not yet.”
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Home insurance can be even more expensive in states that experience severe weather and other disasters. Climate-related catastrophesAs destructive weather events become more frequent and severe, more areas become risky and unprofitable for insurers.
In fact, more and more insurers are choosing to pull out of states like California and Florida, making insurance prices even more expensive for homeowners.
Skies begin to clear after a thunderstorm on May 27, 2021 in Tulsa, Oklahoma. (Brandon Bell/Getty Images/Getty Images)
Florida insurance premiums rose 14 percent last year as hurricane risk prompted several major insurers to stop renewing certain policies or pull out of the state altogether. Severe weather caused more than $15 billion in losses in Florida last year.
However, Arizona saw the largest cumulative increase in home insurance premiums from 2019 through March 2024. According to a Lending Tree study, premiums have skyrocketed by more than 62% over the past five years, “with climate change undoubtedly playing a role.”
As the crisis deepens, will property insurance become more expensive or disappear for many?
According to the National Oceanic and Atmospheric Administration, Arizona has experienced eight extreme weather events since 2019, each costing more than $1 billion.
Nebraska had the second-largest rate increase, with home insurance rates increasing 59.9% since 2019. Illinois came in third with a 56.9% increase. Since 2019, Nebraska has been affected by 20 extreme weather events, while Illinois has been affected by 34.
“Insurance wouldn’t be so bad if that was the only thing driving up premiums, but that’s not the case,” Butt said. “New homebuyers are facing rising interest rates, which is further eroding their purchasing power.”
“New homebuyers are facing rising interest rates, which is further eroding their purchasing power,” said Rob Butt, home insurance expert at LendingTree. (Photographer: David Paul Morris/Bloomberg via Getty Images/Getty Images)
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Oklahoma has the highest average homeowners insurance premiums of any state, at $5,478 per year, 121% higher than the U.S. average. Nebraska follows with an average premium of $5,363 for 2024, 116.4% higher than typical rates. Oklahoma has the third highest average homeowners insurance premium in the U.S., at $4,825.
The surge in home insurance doesn’t show up in government inflation data, which measures only renters insurance policies, which have risen more slowly. If home insurance had been factored into the CPI in 2023, the measure would have been 4.11%, 0.7 percentage points higher than what was actually reported.
This suggests that the CPI doesn’t fully capture the price pain that is actually hitting ordinary Americans.
Inflation is putting severe financial pressures on most American households, forcing them to pay more for everyday necessities like food and rent. The burden falls disproportionately on lower-income Americans, whose paychecks are already tight and who are more vulnerable to price fluctuations.
