Insurance Crisis Reshapes Real Estate Market Across the U.S. with Soaring Costs

The ongoing insurance crisis, which has seen premiums surge and carriers retreat from high-risk coastal states, is now significantly impacting the real estate market across the United States.

In states like Florida and California, insurance premiums have skyrocketed, leading to a drastic shift in the real estate landscape. Bill Baldwin, owner of Boulevard Realty in Houston, notes that the soaring costs and stringent demands from insurance companies are causing many real estate deals to collapse.

“We’re seeing insurance companies impose nearly impossible conditions just before deals close, like requiring new roofs on properties that are only seven years old,” Baldwin explains. Such hurdles often prevent buyers from securing necessary insurance, causing sales to fall through.

The situation is mirrored in commercial real estate, where Ross Markowitz of AEW Capital Management reports a growing need to adjust expectations. “We need to educate our teams that buyers might face much higher insurance costs than we do, which will likely affect their offers,” Markowitz says.

The crisis follows years of significant insurance industry losses due to natural disasters, with nearly $80 billion in insured losses reported last year alone. Jeremy Porter of the First Street Foundation attributes these losses to increasing climate risks, leading insurers to reevaluate their strategies.

States like Florida, which has endured three major hurricanes in two years, now see policyholders paying nearly five times the national average for insurance.

In California, the departure of insurers has led to a 14% increase in policyholders for the state’s insurer of last resort. Louisiana residents are also facing premiums about three times the national average.

This surge in insurance costs is affecting corporate competitiveness as well. John Boyd, Jr. of The Boyd Company highlights that high insurance rates complicate recruitment and retention for businesses, exacerbating the challenges of high home prices and other living costs.

Looking ahead, experts hope that insurance rate increases may ease by 2025 if current mitigation efforts prove successful.

Meanwhile, states like Florida and California are exploring legislative changes to attract insurers back and stabilize the market. Real estate professionals like Baldwin advise clients to secure insurance early in the buying process to avoid delays and cancellations.