Are Rising Home Insurance Costs Sinking Western Florida’s Real Estate Market?

The western Florida real estate market, stretching from Sarasota to Naples, has a reputation as one of the nation’s real estate gems. For years Midwestern retirees, drawn to warmer weather and the area’s plethora of golf courses, made southwest Florida their new home.

Now, that market and the draw of living in the region appear to be drying up, spurred by high inflation rates and surging insurance costs. Florida has the highest home insurance costs in the nation, according to Insurify data — over $9,200 annually for a $300,000 home. And a shrinking pool of home insurance providers is compounding the Sunshine State’s insurance crisis.

Problems escalate in 2020

The current insurance crisis in western Florida escalated in 2020, according to experts.

Insurance fraud and subsequent claims-related lawsuits battered the industry and caused home insurance rates to rise 102% between 2020 and 2022, according to the Insurance Information Institute. Hurricane Ian exacerbated the situation and fueled a 42% increase last year.

Ian was the third-costliest storm in U.S. history, and the aftermath was motivation for some insurers, in an already struggling market, to leave the state of Florida altogether. Others simply closed down.

Fewer insurers led to higher rates.

The average Floridian paid about 421% more in 2023 for home insurance than the national average cost, according to Insurify data.

The average U.S. home insurance rate is $1,700 per year, according to the Insurance Information Institute.

The exodus of Florida insurers caused many residents to flock to the state’s insurer of last resort, Citizens Property Insurance. Now the largest insurer in Florida, Citizens had 1.2 million customers as of December 2023. But Citizens is feeling the pinch as well. The organization reported an operating loss of $2,447,949 in 2022 — a loss increase of $2,280,088 over 2021, according to an independent auditor’s report.

Selling homes remains difficult

With insurance costs rising, some Florida residents are looking to sell their homes and leave the state.

Active listings in the Cape Coral-Fort Myers area are up 62% over last year, and December listings in Punta Gorda were up 139%. Unfortunately for sellers, however, the prices for these homes are not up as well.

Data from the National Association of Realtors finds four of the 12 metro areas displaying the sharpest drop in prices are in southwest Florida. Rate drops in the Naples-Immokalee-Marco Island area were especially volatile, falling 5.9% at the end of 2023, the third-largest drop in the nation.

What’s next? 

Home to three of the 10 most expensive cities in the country for home insurance, as well as the highest average statewide rates in the nation, Florida’s insurance crisis isn’t exclusive to the western side of the peninsula.

And as insurers attempt to recover from back-to-back years of over $1 billion in losses, more rate increases are expected, placing the burden on consumers.

But competition looks to be increasing as well. Six new property insurance companies will enter the Florida market in 2024.

Condo Owners Reciprocal Insurance, Mainsail Insurance Company, Orange Insurance Exchange, Orion 180 Insurance Company, Orion 180 Select Insurance Company, and Tailrow Insurance Company have all been cleared by state regulators and have earned sound financial ratings from industry credit-rating services. Some, like Orange Insurance Exchange, are already writing policies.

As the number of insurers in the market rises, Florida residents can hope the competition they bring will cause rates to do the opposite.