Rising mortgage rates are eroding the fortunes of a growing number of homeowners, but it's not the only challenge they are facing in the current housing market, a recent report said.
Negative equity was a top concern for 56% of Americans, according to the 2023 Insuring the American Homeowner report by Insurify. Overall, 24% of homeowners said that rising mortgage rates and dropping home values meant they now owed more on their mortgage than the current home value.
The highest share (31%) of underwater mortgages were from Americans that purchased a home one to three years ago and 27% of the upside-down loans were from those who bought their homes less than a year ago.
Additionally, nearly 45% of respondents said climate change had already affected the values of their homes, and 76% felt that it would be a problem in the future.
These homeownership challenges are also behind the growing cost of home insurance premiums. Home insurance rates are projected to increase another 9%, following a 7% increase from the previous year, according to Insurify.
"The cost of individual policies is rising," Insurify's Vice President of Insurance Sales Shawn Powers said in a statement. "Homeowners may notice an increase of hundreds of dollars from one year to the next.
"This may induce homeowners to shop around with multiple companies for a policy," Powers continued. "While this is a great way to find a better price, homeowners may find their current carrier is not alone in raising rates."
If you have a mortgage, you're typically required to carry homeowners insurance, but you don't have to stick with any particular insurance company. If you want to save on your home insurance costs, you could shop around for the best rate. Credible can help you compare home insurance rates from top insurance carriers all in one place.
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Climate change risk is one of the main reasons highlighted in the report as to why insurance premiums are rising.
The impact depends on a homeowner's specific risk profile, measured by the Federal Emergency Management Agency's (FEMA) risk index score, which is scaled from zero to 100. Homeowners may be paying an extra $24 in annual home insurance premiums for every point increase, according to Insurify.
"Mortgage lenders are only just beginning to ingest climate risk data," Sam Eckhouse, Principal of ClimateCheck, told Insurify. "SEC-proposed climate risk disclosures and anticipated climate risk assessment guidelines from ASTM [the American Society for Testing and Materials] are helping drive adoption.
"Ultimately, that data will influence lending and thereby home prices — but we're not seeing the impact just yet," Eckhouse continued.
Inflation and rising home prices are also impacting the cost of home insurance, according to a recent Policygenius survey. Inflation has driven the costs of building up, affecting the cost of home repairs after a disaster. Home prices have also made significant gains in the last year, so the cost of replacing them has also increased.
If you want to make sure you have enough insurance and the right coverage for your needs, you can visit Credible to check out plans, providers, and costs.
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Despite the increasing impact that climate change may have on homeowner insurance costs, 89% of homeowners said they were confident their home insurance policy would meet their needs, according to the report.
Almost 98% said they were at least moderately confident that their insurer would resolve their claim satisfactorily. More than half (65%) said that they had filed a claim in the past.
Overall, 39% of Americans said their home insurance was "extremely important" to them.
Bundling homeowners and auto insurance could be one way to find savings as costs soar. To help you find the best insurance rate for your situation, you can visit Credible to compare multiple providers at once and choose the right option for you.
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