The home market has gone through significant changes since the start of the COVID-19 pandemic. More flexibility due to the rise in work-from-home jobs, coupled with historically low interest rates, fostered a booming real estate market for quite some time.
Yet the market is not without its challenges. Rising interest rates, inflation, concerns over climate change, and climbing insurance premiums all rank among the top homeowner concerns, according to Insurify’s recent Insuring the American Homeowner study. The report leveraged Insurify’s data along with a poll of more than 700 respondents in cities across the nation, as well as data provided by FEMA, the U.S. Census Bureau, and more.
New homeowners are already underwater on their mortgages
The Fed has increased interest rates a startling nine times over the course of the last 12 months, leaving prospective homebuyers and homeowners with adjustable-rate mortgages in the lurch.
Unsurprisingly, mortgage payments rank as the second-greatest stressor for homeowners, according to data collected by Insurify. Overall, 24% of the homeowners Insurify polled were underwater on their mortgage. The group with the highest share of underwater mortgages was those who bought between one and three years ago (31%), followed by those who bought their homes less than a year ago (27%).
Even those who weren’t currently underwater were concerned that they soon would be. More than half the poll’s respondents (56%) said they were concerned they would owe more on their home than its value. The group with the highest level of concern was, again, homeowners who bought their homes between one and three years ago, with 69% expressing concern.
Trends in Negative Home Equity
Homeowners are concerned climate change is eroding home values
While home security and mortgage payments dominated homeowner concerns in Insurify’s study, global issues like climate change were also top of mind.
Almost 45% of surveyed homeowners felt climate change had already affected the values of their homes, and 76% felt that it would in the future.
These concerns weren’t just limited to those who live in areas that regularly see climate catastrophes, like Tampa and Houston. In fact, 57% of respondents in Boise and 69% Phoenix were concerned about the impact of climate change on their home values.
Share of homeowners expressing concern over the impact of climate change on their home’s value
Climate change concerns are warranted
“Mortgage lenders are only just beginning to ingest climate risk data. SEC-proposed climate risk disclosures and anticipated climate risk assessment guidelines from ASTM [the American Society for Testing and Materials] are helping drive adoption,” he says. “Ultimately, that data will influence lending and thereby home prices — but we’re not seeing the impact just yet.”
In addition to mortgage prices and home values, climate change is also influencing home insurance premiums. Climate change is one of the main drivers behind the home insurance increases consumers saw last year and will continue seeing this year, according to representatives from home insurance companies Plymouth Rock Assurance and Grange.
Just how much climate change impacts your home insurance rate is difficult to determine and depends on your specific risk profile. For every 1-point increase in a county’s FEMA risk index score (scaled 0–100), homeowners can expect to shell out an extra $24 in annual home insurance premiums, according to Insurify’s analysis of FEMA’s risk data in conjunction with home insurance premiums.
Home Insurance Costs Based on FEMA Risk Rating
Theft, hail, and fire were the most common home insurance claims
Home security proved paramount among surveyed homeowners, with 23.9% of respondents citing it as their top concern. This was especially true for mid-term homeowners, those who bought their homes between one and nine years ago.
This concern appears well-founded, as theft was also the most commonly filed home insurance claim in areas like New York City, Phoenix, Tampa, Houston, and Columbus (where the most common claim was tied between theft and hail).
Insurify’s research found that a unique array of claims dominated other metro areas, including fire (Los Angeles and Denver), hail (Denver and Columbus), and wind damage (Boise).
Homeowners are confident in their home insurance policies
Despite the wide array of concerns reported in Insurify’s study, homeowners generally felt their current home insurance policy was sufficient to meet their needs. In fact, 89% reported they were confident they had sufficient home insurance, and 85% said they were more than moderately confident their home insurance was adequate in the event of an emergency.
Almost 98% said they were at least moderately confident that their insurer would resolve their claim to their satisfaction.
These insights seem largely based on experience, as 65% of respondents reported they had filed a claim in the past, and 39% of overall respondents said their home insurance was “extremely important” to them.
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