The US housing market is struggling despite a strong economy. A recent study found that homeowners insurance costs have increased by 74% since the Great Recession, reaching $15 trillion in total. This sharp rise in prices has made it difficult for many potential buyers to enter the market, particularly first-time homebuyers.
The main issue is a lack of supply relative to demand, which has been exacerbated by high insurance rates. Insurance companies are increasing premiums due to the scale and scope of natural disasters, driven by climate change and economic wealth in affected regions. The devastating fires in Los Angeles are just one example of this trend.
According to Steve Koller, a postdoctoral fellow at Harvard University, “Insurance functions like a glue that helps the housing finance system stick together.” However, high premiums are now creating another barrier to ownership. Homeowners insurance has become a major budget item for existing and future homeowners, making it essential to comparison shop for the best terms and coverage.
Regulators, policymakers, and industries must take climate change seriously and innovate a more sustainable and affordable homeowners insurance system. The current situation is unsustainable, and changes are needed to address this pressing issue.
As the US housing market continues to face challenges, it’s clear that a more comprehensive approach is required to ensure that everyone has access to affordable homeownership opportunities.
Source: https://www.startribune.com/la-wildfires-another-reminder-us-needs-more-affordable-homeowner-insurance-system/601207777