Alarming Number of New Mortgages Already Underwater

Home market volatility will likely continue in 2023, as home insurance rates continue to rise, home values drop, and an alarming number of new mortgages are already underwater, according to the 2023 Insuring the American Homeowner report by Insurify.

“The cost of individual policies is rising. Homeowners may notice an increase of hundreds of dollars for one year to the next,” said Shawn Powers, Insurify’s VP of Insurance Sales. “This may induce homeowners to shop around with multiple companies for a policy. While this is a great way to find a better price, homeowners may find their current carrier is not alone in raising rates."

Key Findings:

• Insurify projects home insurance rates will increase an additional 9%, following a 7% increase from the previous year.
• Home values and home-buying in western states are declining, with an average 31% drop in home sales among major metropolitan areas like Las Vegas, Provo, San Jose, Seattle, and San Diego.
• Among new homeowners who bought in the past year, 27% are already underwater, and 58% worry that they will soon be.
• About 89%of homeowners were confident that they had enough home insurance, and close to 98% were at least moderately confident that their insurer would resolve their claim to their satisfaction.

Insurify also found that American homeowners are increasingly concerned over the impact of climate change on their home values. Even homeowners in cities like Boise, Idaho, and Columbus, Ohio, who aren’t often exposed to natural disasters, displayed high levels of concern on the matter.

Homeowners surveyed for the report identified mortgage payments and losing property value as major stressors. This insight is especially compelling as the Fed announced another quarter-point increase in its benchmark interest rate, putting it above 5% for the first time in more than 15 years. These increases are part of the reason why 24% of Insurify’s survey respondents were underwater on their mortgage.

The report, which features Insurify’s own proprietary data, in addition to data from the U.S. Census Bureau, Federal Emergency Management Agency, and other publicly available sources also highlighted:

• The average annual home insurance rate will rise from $1,636 in 2022 to $1,784 in 2023.
• More severe weather, supply chain delays, and higher material and labor costs are the biggest reasons why home insurance rates are continuing to increase.
• Home security is the biggest stress point of owning a home; nearly 24% of those surveyed cite it as their top concern. Unsurprisingly, theft was the most common home insurance claim identified by the survey.

See Insurify’s 2023 Insuring the American Homeowner report for more information, here.