Prospective homebuyers are cheering on declining mortgage rates — the rate on a 30-year fixed has fallen in the last week to the lowest reading since 2023. However, the lingering issue of home insurance is casting a dark cloud over the housing market for excited buyers.
Content creator, podcaster, and “In This Economy?” author Kyla Scanlon joins Madison Mills on Market Domination Overtime to highlight the increasing price tag for home insurance. Scanlon outlines “a perfect storm for home insurance” as costs rise, especially in states like California and Florida where extreme weather and climate events ravage communities.
For those purchasing homes in the attempt to live the American Dream, Scanlon says it is instead turning into the “American Nightmare.”
For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.
This post was written by Ivana Freitas.
Mortgage rates have fallen again due to expectations of a fed rate cut the rate on a 30 year fixed falling in the last week to the lowest reading since May of 2023.
That’s a bright spot for potential home buyers, home insurance remaining a source spot in the housing puzzle with more here.
We’ve got right.
Podcaster, content creator now author Kyla Scanlan joining us, Kyla.
It’s, it’s great to speak with you.
Thank you so much for making the time here.
Just start by giving us the context, right?
We know that housing supply has been an issue, but you voice that home insurance could be the other shoe to drop.
Why?
Well, you can’t have a mortgage if you don’t have home insurance and home insurance has gone up by about an average of 20% since 2023.
So it’s just becoming an increasing issue.
It’s becoming more expensive.
You have insurers entirely pulling out of states like California, Florida, Louisiana.
And there isn’t really a backup option.
The government can of course step in and help out with things like the citizens insurance in Florida.
But yeah, it’s just something as we build more homes, we have to have home insurance in mind.
Yeah.
And, and why is this happening now?
Why is this becoming such a costly problem for home buyers?
And why is it different across the country?
Well, part of the issue is we are having more natural disasters, things are just more risky.
Um, and then also part of the issue is reinsurance.
So those who I’m sure the insurers are getting more expensive as well.
They’ve raised rates by an average of about 37% I think.
Um And then of course, you have inflation.
So repair costs are really high maintenance costs are really high labor costs for all of those things are really high.
And that sort of bowled up into this perfect storm for home insurance.
And it’s part of the reason why it’s increased so much and so quickly.
Yeah, and, and Kyla, one of the stats that you pointed out is that the US government has rebuilt some structures four times in the last 20 years due to climate related issues with homes.
And I’m curious how big the stakes are here if, if home insurance does continue to not account for that kind of need, what broader economic impact might that have?
Well, I think the thing is you’re already seeing it right?
Like you’re seeing these homeowners who purchased homes in California, Florida, Louisiana, all of the other states that are impacted.
And if you don’t have insurance, you really can’t live there.
And so of course, if you’re a cash buyer, like you can buy the house, you can self insure, that’s probably not recommended.
Uh but you know, 68% of homeowners do require mortgage.
So therefore they do require insurance and the insurance industry is pretty convoluted.
It’s extraordinarily complex.
Um And you know, it just takes a lot of time to understand it and I don’t understand it perfectly at all.
And I think it’s just more so the trend is worrying like there are increased natural disasters, inflation is going down, but these costs are still extraordinarily high.
And then you have these people who are purchasing homes in the attempt to live the quote unquote American dream.
And instead it’s turning into the American nightmare and, and Kyla, that’s exactly where I wanted to go with this conversation because we have a personal finance tool here at Yahoo Finance that tells you how much house you can afford and it doesn’t average for a lot of things like the average mortgage down payment.
Uh your average mortgage rate, of course, for example, but the monthly payment still comes up relatively high.
It’s around $3000 for the one you’re looking at on your screen right now is owning a home, still a good investment in an environment where it’s just this costly.
Um II I know a lot of people that’s the dream, right?
That is the American dream to own a home.
A lot of people have been left out of the housing market because mortgage rates have increased.
But as you all had on screen earlier, they’re, they’re going down on hopes of a fed cut.
Um But I think for a lot of people, they are priced out of the housing market and there have been proposals around building housing.
That’s something that the government is actively working toward, but that takes time and then of course, the more density you have, the more that you have to focus on home insurance.
And so I think the best thing to do is diversify.
Like, I don’t know if a home can continue to increase in value the way that it has.
Um and maybe stocks and business ownership, a good thing to consider as well rather than pinning a retirement to a house.
It’s just tough for a house to be both a speculative asset and a place to live.
All right, Kyla.
Well, thanks so much for the overview.
I know you did a lot more reporting on this as part of your, your writing.
So uh folks should go check that out if they want more information.
But thanks Kayla for joining us.
Thank you.
