The home insurance shock has investors concerned, finds ResiClub-Groundfloor survey

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Earlier this year, a friend of mine saw his monthly home insurance and property taxes on his Fort Lauderdale rental property, which he bought during the pandemic frenzy, increase by $500 per month. It cut his cash flow in half.

He isn’t alone: The average U.S. home insurance premium rate rose +11.3% in 2023, according to S&P Global. That was double the +6.6% increase in 2022, and far above the pre-pandemic increases in 2018 (+3.2%) and 2019 (+2.5%).

Among the landlords polled in the ResiClub-Groundfloor Housing Investor Survey conducted this month, 80% told us they’re concerned about future increases in home insurance. Of those, 37% are “very concerned.”

Tomorrow, ResiClub readers will get the full results from the ResiClub-Groundfloor Housing Investor Survey. In total, 224 investors who own short-term or long-term single-family, condo, or townhome rental properties completed the survey.

Home insurance premiums have been increasing faster in coastal states, particularly around the Gulf, with the average Texas homeowner experiencing one of the largest increases last year (+20.3%). That said, these increases are happening far beyond the coast. According to ResiClub’s reporting, the rise in home insurance premiums is due not only to climate risk but also to housing and construction inflation. Replacement and repair costs have soared, and insurers are trying to keep up, although some state insurance commissions are slowing the process.

Even homeowners in Indiana and Iowa saw their average home insurance premium rates rise by +12.2% and +13.5%, respectively, in 2023.

That explains why the ResiClub-Groundfloor Housing Investor Survey found that investors across the country, even in the Midwest, are concerned about the prospect for rising home insurance premiums.

On Tuesday, we learned that U.S. home prices, as measured by the Case-Shiller National Home Price Index, rose +1.2% between the March 2024 reading and the April 2024 reading

+4.0% since the 2022 peak

+6.3% year-over-year

This latest Case-Shiller reading shows that the 2020s decade has already seen more home price appreciation than the total for the 1990s decade, 2000s decade, and 2010s decade.

Through the first 52 months of the 2020s decade, U.S. home prices are up +51.0%.

One final note: While national single-family home prices are rising on a year-over-year basis, there are some exceptions. In particular, pockets around the Gulf, which are experiencing a healthy level of new construction supply hitting the market, have been more significantly impacted by the ongoing home insurance shock, and some saw pricing fundamentals get too stretched during the Pandemic Housing Boom.

Nothing in this newsletter is investment advice. Please do your own research.