The home market has experienced significant changes since the beginning of the COVID-19 pandemic, including a surge in remote work and historically low interest rates that fueled a booming real estate market. However, recent challenges such as rising interest rates, inflation, climate change concerns, and increasing insurance premiums are impacting homeowners across the nation.
A new study from Insurify, titled Insuring the American Homeowner, reveals that many new homeowners are already underwater on their mortgages. Over the last 12 months, the Fed has increased interest rates nine times, straining prospective homebuyers and those with adjustable-rate mortgages.
According to Insurify’s data, mortgage payments are the second-greatest stressor for homeowners. A startling 24% of homeowners polled were underwater on their mortgage. The group most affected were those who bought their homes between one and three years ago (31%), followed by those who purchased less than a year ago (27%).
Many homeowners fear their situation will worsen, with 56% of respondents worried they will owe more on their home than its value. Once again, those who bought their homes between one and three years ago expressed the highest level of concern (69%).
In addition to financial concerns, homeowners are increasingly worried about the impact of climate change on their property values. Nearly 45% of surveyed homeowners believe climate change has already affected their home values, while 76% feel it will in the future. Concerns about climate change’s impact on home values were not limited to areas prone to climate disasters, as 57% of respondents in Boise and 69% in Phoenix also expressed concern.
Climate change is not only affecting home values but also insurance premiums. Representatives from home insurance companies Plymouth Rock Assurance and Grange cited climate change as a primary factor behind the increases in home insurance premiums seen last year and expected to continue this year.
The extent of climate change’s impact on home insurance rates varies based on individual risk profiles. Insurify’s analysis of FEMA’s risk data in conjunction with home insurance premiums found that for every 1-point increase in a county’s FEMA risk index score (scaled 0–100), homeowners can expect to pay an extra $24 in annual home insurance premiums. As interest rates continue to rise and climate change concerns grow, homeowners may face even more challenges in the future.
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