High insurance premiums affect home-buying decisions

Earlier this year, CNBC reported that 31 percent of Gen Z can’t afford to buy or rent, and 2023 was the least affordable home buying year in more than a decade. In Southwest Louisiana, high interest rates and inflation aren’t the only thing keeping young adults living at home and hampering the real estate market.

High insurance premiums are pushing home ownership further out of reach, and some houses aren’t part of real estate inventory because four years after the hurricanes and other weather disasters, they are still not repaired because claims have not been paid or settlements have not been reached.

The housing market is not just a sector of the economy, but a significant force driving economic activity.

“I have had deals that failed when the cost to insure the home exceeded what my client could afford,” said Amanda Cox, Latter & Blum/Compass. “As agents, we are bound to protect our clients. Therefore, during the inspection period it is critical that we work arm in arm with our associates in the insurance realm so the buyer can know the true cost per month of this home, which is the principal, interest, taxes – and insurance.”

In another deal that did not come to fruition because of insurance premiums, Cox said one insurance company was hesitant to write a policy because the buyer had made a renter’s insurance claim in the past.

“So, in the eyes of the insurance industry, this client had ‘history’ and nobody wanted to ‘write’ them for a reasonable premium. To my knowledge, my client is still in a rental.”

She has friends and colleagues who have been dropped by their carriers, leaving them to scramble to find coverage elsewhere, often at twice the cost or more.

Cox noted that new construction is easier to insure with some builders having an ‘insurance arm’ of their company issue the policy.

“The larger the home, and the older the home, the higher the premium,” she said.

With increases in home insurance, flood insurance and interest rates, the home that cost $1,400 a month in 2020, would cost $2,154 today, according to a Times Picayune article published earlier this month. Where a family with a household income of $57,000 a year could comfortably afford the 2020 home, that family would need to make $86,000 now.

“It feels like Louisiana homeowners pay a high price for the lives we live in this state we love,” Cox said. “Luring new insurance companies here would be great, as the existing providers seem to be stretched drum thin. Affordable homeowner’s insurance remains one of the biggest challenges for my buyers.”