Selma Hepp, Chief Economist at CoreLogic, discussed how rising insurance costs are significantly impacting housing affordability during the Housing Economic Summit. Traditionally, insurance was regarded as a stable cost in housing economics, but shifting patterns show a rise in borrowers paying more for insurance and taxes than for their mortgage interest. CoreLogic data indicates substantial increases in home insurance costs across various states, with the average annual premium significantly higher in Tornado Alley. Hepp highlights key drivers like natural disasters as major contributors to this cost escalation, emphasizing the changing landscape of housing affordability.
As housing costs rise, non-mortgage components like insurance are becoming significant, influencing overall affordability in the housing market, which was previously considered constant.
Hepp emphasizes how insurance costs, rising significantly, are affecting what borrowers actually pay monthly, while 10% now pay more for insurance and taxes than for interest.
Insurance premiums, especially in Tornado Alley, are starkly higher than in regulated markets like California, where regulations keep costs manageable despite increasing natural disaster risks.
The rapid rise in homeowners' insurance costs is driven by six key factors, primarily the frequency and severity of natural disasters leading to significant losses.
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