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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 of all 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 post on Bluesky. “Florida, in particular, is going to have huge problems.”
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. According to the Insurance Information Institute, “cumulative replacement costs related to homeowners insurance soared 55% between 2020 and 2022.”
In fact, major insurers like Farmers and Progressive have either left states like Florida or limited their exposure to these disaster-prone regions. Mark Friedlander of the Insurance Information Institute said, “We have estimated up to 15% of Florida homeowners may not have property insurance, based on input from insurance agents across the state.”
Homeowners and potential homebuyers should be aware of how risky it is to go without coverage and prepare for the cost of adequate protection.
Lowering the cost of home insurance may seem difficult with these facts at hand, but it is still possible to shop around for a better deal on your home insurance with BestMoney. Moreover, their easy-to-use platform makes finding a better deal possible in just minutes.
Find the best home insurance rates in your area when you answer a few quick questions about yourself and your home. You’ll see a list of offers tailored to your needs so you can easily comparison shop for a new rate on your mortgage.
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. 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.
Don’t forget that shopping around is the best way to find an affordable rate. Borrowers who received two rate quotes saved up to $600 annually, according to 2023 research from Freddie Mac. That number rose to $1,200 annually for borrowers who searched for at least four rate quotes from different lenders.
If you want a quick and efficient way to do this, the Mortgage Research Center (MRC) can help you quickly compare rates and estimated monthly payments from multiple vetted lenders. All you have to do is enter some basic information about yourself, such as your zip code, your desired property type and price range and annual income.
Based on the information you provide, MRC will show you mortgage offers tailored to your needs so you can shop for a mortgage with confidence.
After you match with a desired lender, you can set up a free, no-obligation consultation to see if you’ve found the right fit.
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.
Invest in property without owning it
Getting on the property ladder with the soaring price of mortgages and insurance may seem impossible, but you can still grow your wealth in real estate without the hassles of buying, maintaining and insuring a property.
Platforms like Arrived have made it easier for average Americans to invest in rental properties without the need for a hefty down payment or the burden of property management.
With Arrived, you can browse a curated selection of homes, each vetted for their appreciation and income potential. Once you find a property you like, you can choose the number of shares you want to buy and start investing in real estate with just $100.
You can also diversify your investment portfolio with the Arrived Private Credit Fund. This fund invests in short-term loans that are used to finance professional real estate projects, which can include property renovations, rehabs, or new home construction projects managed by real estate professionals.
The fund generates cash returns by collecting interest payments on the loans, so you can get monthly distributions as an investor. To get started, check out their in-depth guide to equity investing.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
