Rise in Homeowner’s Insurance Will Affect Affordable Housing, Home Mortgage Demand in Florida/Other States

The soaring cost of homeowner’s insurance may be starting a new retirement trend in the United States, the chief economist for the National Association of Realtors said Friday.

“There will be a whole new set of destinations because of the hurricanes and the rise in the cost of insurance,’”David Lereah said Friday at the NAR’s convention in New Orleans. “People are going to think twice about wanting to live on the water.”

This would have a negative effect on home mortgage loan demand in states such as Florida.

Afterall, a decade of severe hurricanes that have pounded the Sunshine State, the Gulf Coast, Louisiana, Texas and places up the Eastern coastline, has increased the price of homeowner policies and the difficulty in obtaining them, Lereah said.

“If we could sift out all the other problems (hurting home sales), the problem that will remain is the availability and affordability of insurance,’ he said. “Start in southern Florida and work your way up to [the Maine housing market].”

In Florida, which has had 12 hurricanes since 1995, the cost on homeowner’s insurance has risen “tenfold,” Lereah said. It’s causing some families to leave the state, he added, looking for protection from the storms and the insurance costs.

“We’re talking people who lived there 20, 30 years,” Lereah said. “A lot of them are moving to the Smoky Mountains.”

In California, people are seeking safety in Washington and Oregon, Lereah said.

The Louisiana housing market, which was hit by Hurricanes Katrina and Rita in 2005, is currently having problems getting insurance for home buyers. Agents say prices have shot up from $1,000, to $3,000 or $4,000 annually, putting a damper on home sales in the state.

“I think we need for the federal government to get involved and create some sort of backstop,” Lereah said. “If you’re a private insurance carrier you think twice about getting involved in an area where there is not a backstop.”

The shift in politics with the Democrats taking control of both houses of Congress, should be good for both real estate agents and buyers, Lereah said. Democrats lean more toward assisting the home-owning sector than other sectors of the economy.