Interesting stuff. Appreciate your perspective.
We've all been wondering what's going to trigger the next crash in the housing market. Sounds like unaffordable insurance premiums and/or uninsurable properties is a strong contender.
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Interesting stuff. Appreciate your perspective.
We've all been wondering what's going to trigger the next crash in the housing market. Sounds like unaffordable insurance premiums and/or uninsurable properties is a strong contender.
I know a bit about insurance but not a ton in real estate. I would think that a lot of the problem will lie on the supply side. Much of the high risk property is either old and the land is valuable, neither is valuable, rural with lower incomes, or recreation and view shed based. Basically, common folks won't be able to insure things of value like mountain homes will have to cash out but will create pressure on urban and feeder areas. Older properties in cool locations will gentrify but not by the middle class. Upper end neighborhoods will have infill of nice homes and decent land will get high density multifamily. Both will require money and if you don't have a bunch of it, your single family home dreams will become a shared wall. Rural people without a view will just be fucked. If they have enough acres, they may be able to salvage something from institutional ag investors if there's water around. Basically it will be a balancing act of what is affordable to insure with the demand placed on those properties. Or rent (insurance costs will be passed on to you though). Hard to predict the magnitude here but it is at least a conversation point.
What a lot of people miss is that they look at an insurance company's profits globally. They don't look at line of business and it's not easy to make a buck in personal lines-home and auto. The market seems to have plateaued in many business segments and is softening slightly. Heavy property and auto risk is still on watch though and could go either way barring any major climate related disasters.
There's so many macro issues affecting housing, insurance costs certainly are not the lynch pin but is in the chain of trouble to come.
My advice if I were shopping for home insurance right now is find a reputable broker that will return calls before and after selling you something. Prior to meeting, I would talk with a contractor prior to meeting the agent about rebuild costs and don't fuck around with insuring to value, just do it, have ariel pics ready even if just google earth and map closest fire dept and response time, if the home is older than 20 years, pay for a plumbing and electrical inspection, and have any updates ready to prove with receipts, consider a roof replacement or at least have a bid ready if older than 20 years, have your exterior tidy with landscaping trimmed away from the envelope with some current pics you can email, be ready to explain if google street view pics or zillow/redfin type pics don't paint your house in a good light, if your credit fluctuates, shop insurance at the peak, have all current policies ready and consider higher deductibles. The good agents with good markets are busy and the profit isn't huge on single family home policies. Make it easy for them without a bunch of back and forth questions and they should take care of you. Also, don't beat them up if they don't shop the policy every year. Used to benefit you to do so. With all the churn and turmoil (location dependent of course), settle in for 3 or more years even with some moderate premium increases. Capacity is a big term right now. Due to reinsurance, insurance companies are running into capacity issues meaning they can only insure so much value in a geographic area. They will cap business in a radius. Sometimes when you give a policy up to save short term savings, the new cheaper company will have come into a market buying up business with excess capacity and then figure out they were underpriced and give a big increase second year. Might not be able to jump back to where you were.
Profit in transactional business (single family home/auto) is built on transaction efficiency meaning moving fast. Finding someone who will actually review coverages with you is key and hopefully they can access the markets you need. Treat the humans with a bit of respect-things are not like they used to be. If you're a pain, they've got a stack of applications on their desk just like yours to work on. Be an easy one so they don't move yours to the bottom. Next stop is calling 1 800 Geico and I can guarantee the person picking up the phone does not give a fuck nor has a ton of experience. And they work for Geico so that is what they'll sell you.
The building I am talking about, the insurance agency found that some of the building had aluminum wiring. That was enough to drop em. Upkeep has been routine. Lots of newly updated stuff like railings, roof, pool, hot tub, etc. but apparently wiring in a few units hadnt been updated.Quote:
Originally Posted by fastfred
Glad i am in a sfh when i hear about this stuff. Although i think we are due for a new roof sometime soon.
Just wait for the next hail storm to come through, that’s what everyone around here does (outside Boulder). The roofers come around and convince all the home owners they need a new roof and it’s “free”… and then the following year all our premiums get jacked up to cover the cost of those roofs. I think 3/4 of our town got a new roof in the last 12 months after some pretty minor storms last spring.Quote:
Originally Posted by Name Redacted
We are too high for hail.Quote:
Originally Posted by smmokan
Don't be lured in by low HOA fees or it might bite you in the ass
50-million-assessment
I most cases it's the industry that takes the hit as insurance companies are subject to very strict reserve and fiduciary requirements, so if an insurer starts to fail in a state, the state will take the policies and just assign them to other carriers to deal with.Quote:
Originally Posted by dunfree
Only place gov puts money in is for TRIA (terrorist ever nt damage) backstopping (as terrorism is not something that can be modeled well with traditional techniques so the alternative would be that they're uncovered events.
Other one is NFIP (flood) which basically every insurance pro will tell you is a dumb handout given they don't have the same reserve restrictions nor the ability to forbid coverage on high risk properties.
Things like FAIR plan in CA are basically an additional tax to do business in the state as it comes entirely out of insurance company coffers.
Also, if you're mad about any insurance stupidity in your state, go talk to the state insurance commissioner as they set most rules and policies as well as can make life hell for an insurer. Most also don't give a flying f what insurers think as everyone hates insurance companies.
I don't really see this as an HOA fee issue.Quote:
Originally Posted by Vt-Freeheel
Did these people really expect to not have to do maintenance on a 40+ year old building? This seems to be a detached from reality issue.
....and this is basically many HOAs and the insurance issue in a nut shell. Frequently there is shit tons of deference maintenance, no accounting/depreciation schedule, no due diligence by buyers/realtors/inspector or either the physical condition of the common elements or the financials and so on.Quote:
Did these people really expect to not have to do maintenance on a 40+ year old building? This seems to be a detached from reality issue.
As a contractor, I've worked with a large condo complex for more than ten years. They settled a lawsuit with the builder/developer for construction deficiencies and proceeded to basically do nothing and piss the money away. The BOD in charge of that dumpster fire, put lipstick on the pig and sold.
And then people wonder why the insurers want to run away. If the roof hasn't been replaced in 30 years, there are water infiltration issues and the 3rd floor deck railing are rotten how to you price that?
Quote:
Originally Posted by schuss
FEMA?
https://www.fema.gov/fact-sheet/indi...eholds-program
this is pretty much what I can't get over when it comes to real estate and it blows my mindQuote:
Originally Posted by Conundrum
I pretty much tell people that everything in a home windows siding roof doors appliances hvac all has a lifespan of 25 years and then it's done toast
distressed or property that has not been maintained (we are not even talking about updated for taste) stuff is selling for top dollar it seems people are too stupid to realized that the home needs 100k in basic work
a house maintained and updated sells for 625k the shit hole next door same floor plan sq ft etc hasn't been maintained furnace is 40 years old and holding on by a thread roof is orginal and it has aluminum windows and that guy things he can get 575k cause well the house next door went for 625k sure enough some dumb fuck comes by and says that works.............
the people quoted in the article are the same people who may have lived in a single family home for 30 years and not done a single thing unless water was pouring in through the roof or the heat or hot water went outQuote:
Originally Posted by AdironRider
so many hoa's get run into the ground because no one wants to spend money
Huh, I didn't realize that.Quote:
Originally Posted by AdironRider
Maybe a bit lazy, sure, but also too busy to shop around simply because the guy annoys me. I'm annoyed by people who suck at their job, the fact they don't care they suck, and they get paid handsomely - I couldn't switch plans and save money. Now I think about it - I also caught him being dishonest last year withholding important info before I signed up for another year.Quote:
Originally Posted by Conundrum
I absolutely realize $25k is nothing, and that's split up between many insurance companies so no one entity is even getting 25k. So it's small apples but it doesn't mean I should be treated like shit IMO. I appreciate your advice.
I agree with you-you should absolutely be treated better. The industry I'm in has a deservedly bad rep on the sales side. I do hope there are some of us that show up and provide value. Plus making money doing this is easier when there are people like your guy. One thing to consider is depending on your insurance companies, you might be able to switch agents without changing carriers and send a shot across his bow if you wanted to.
AdironRider is correct for some direct writer insurance companies like Federated, Farmers, etc with varying comp models. Most independent agencies are going to get between 10-15% of the premium annually. How that is split with the agent-agency varies but it is residual and every year so they should continue to work for you.
I've been really happy with Amica and I like their direct writer model.
I had a >$30k hail claim six months into ownership of my first house and they were great to work with.
I use them for home (including earthquake), auto and umbrella. Their service has been exceptional.
Good company when the cycle is good. Their performance will be regional and if I were you, I'd ride it as long as they let you. Here is some info that supports some of my trepidation with certain lines of insurance business. Amica has a great rating right now and a potential downgrade coming but with the downgrade will be still be a highly rated company.
Can't really tell what happens next but looks like fed rate cuts are being pushed out past the summer. Might be a tough year for insurance companies making money on the float. This is worth monitoring:Quote:
The negative outlooks for Amica Mutual Group reflect the decline in its balance sheet strength, specifically a deterioration in risk-adjusted capitalization in recent years. Increased loss costs in both the auto and homeowner’s line of business have driven substantial underwriting losses in 2022 and 2023, which has significantly impacted the group’s surplus position and overall liquidity. Nonetheless, the group’s liquidity profile remains supported by Federal Home Loan Bank borrowing capacity, reinsurance and portfolio cash flow. Additionally, Amica Mutual Group’s results rely heavily on net investment income and realized capital gains, which have contributed collectively to positive net earnings in most years. However, this benefit was muted in 2022 and 2023 due to the turbulent investment markets and rapid increases in interest rates, which caused underwriting losses to outpace investment earnings.
Laymens terms, they'll pull out of the worst performing markets and try to right the ship by raising premiums in cusp markets. Performing markets should be stableish. So if you live in a newer home, without threat of fire, flood, wind, hail, or earth movement, your premiums should be pretty predictable.Quote:
A leading credit rating firm said Monday that U.S. insurance companies that sell homeowners policies face a future of major losses — prompting the firm to assign the homeowners sector a “negative” outlook for the first time.
AM Best said it dropped its outlook for the home insurance sector from “stable” to "negative" in large part because of “elevated natural catastrophes” and “more frequent” weather-related events that cause major home damage.
This will reduce the options and raise pricing in many locations.
This is predicated on the event being classified as a "disaster" which is subject to optics/politics. Not reliable IMO.Quote:
Originally Posted by Conundrum
Agreed. Just saying the government is already stepping in where the private markets are not and private property now becomes a tax payer burden. We'll see more of it unless the weather calms down.
Don't forget ice storms and unusually cold weather (many burst pipes in Spokane this winter even though the lows were only around zero). Is there anywhere in the US that's free from all that?Quote:
Originally Posted by Conundrum
Good point. Haven't seen insurance companies feather brakes on those yet but have seen requirements for auto leak detectors.
My insurance co is covering my roof (just about 20y after they covered my roof the 1st time) due to a couple gnarly hailstorms last summer.
I'm getting stone-coated steel this time around. My mate that is an actuary in the industry said that there is a *significant* premium discount with a hail-proof roof.
I just don't ever want to deal with roof damage again...
Yes, but our prices are crazy.Quote:
Originally Posted by dan_pdx
Isn't wildfire an issue down yonder?Quote:
Originally Posted by liv2ski
Don't you have earthquakes to worry about?Quote:
Originally Posted by liv2ski
Earthquake is separate and an addition. Not required by lenders. I think overkill if you have a modern wood structure and don't live close to a fault. I would buy it if I lived in Seattle, but never have in San Diego.Quote:
Originally Posted by Toadman
My house is across the street from large open space area, and between the street and my place is a HOA green space with Eucalyptus trees. Not only are the trees messy, I worry about those trees tipping over on the house or being a fire risk. I'm not sure how insurance companies define high fire risk, but I'm in it.Quote:
Originally Posted by skaredshtles
Also doesn't help that San Diego has had two huge fires, one thanks to a clown from LA: https://en.wikipedia.org/wiki/Cedar_Fire and second thanks to the shitty local power company: https://en.wikipedia.org/wiki/Witch_Fire
I'm amazed more places in the Western US are not having issues with fire insurance, maybe because those cities and towns haven't had much building loss yet. All it would take is the wind going the wrong direction in a lot of places I have seen.
I have lived in San Diego County for 45 years and never felt a big one like I did in LA county as a kid.Quote:
Originally Posted by Toadman
On the island?Quote:
Originally Posted by skaredshtles
I insisted on EQ for a bit until I realized if the big Cascadia hit that coverage would do nothing.Quote:
Originally Posted by 406
^^^ha, yeah, good point
I have it after seeing two earthquakes in the San Fernando valley area. Easily hundreds of thousands of dollars in damage to many many homes. Really not a bad idea in CA and I don't remember the premiums being too crazy.
Why? Aren’t almost all those insurers admitted and backed by the state, and by extension the federal government?Quote:
Originally Posted by Hood26
They aren’t but standard policies come with a 15% TIV (total insured value). So if you have a $1M policy you have a $150k deductible.Quote:
Originally Posted by liv2ski
Well, it's a bit of a long story with some fake dormers that were improperly installed 20 years ago and the leaks started when they were removed. Oh, and Vail was managing our HOA and paid the contractor who was supposed to remove them so of course he split after getting paid before the work was complete. Regardless, the roof is now new as of last summer.Quote:
Originally Posted by Conundrum
The ski in ski out place is running close to $2K a month because their insurance was dropped, and it's ready for some serious updates, easily $100K. That's a tough sell when you add current interest rates on top of it. I'm glad it isn't my listing.
Pretty sure I have the 5% deductible. My opinion on insurance is if I have it, I will never need it, if I don't, I am courting disaster.Quote:
Originally Posted by neufox47
I get my house insurance thru the local credit union so they must have at least half the town for clients and my ski bud was head of the board so no problems that I have heard about and you would in the small town
Got to think that at some point that >7% interest rates are going to have a substantial impact on the housing market.
Quote:
The average daily mortgage rate this week surpassed 7.4%, the highest level since last November, after a hotter-than-expected inflation report and the Fed’s confirmation that interest-rate cuts will be delayed. Home prices are rising, too: The median U.S. home-sale price increased 5% from a year earlier during the four weeks ending April 14, bringing it to $380,250—just $3,095 shy of June 2022’s all-time high. The combination of high mortgage rates and prices have brought homebuyers’ median monthly housing payment to a record $2,775, up 11% year over year.
There are signals that buyers are out there touring homes despite rising rates. Mortgage-purchase applications are up 5% week over week, and Redfin’s Homebuyer Demand Index–a measure of requests for tours and other buying services from Redfin agents–is near its highest level in seven months. Chen Zhao, Redfin’s economic research lead, said some house hunters are hoping to buy now because they’re concerned rates could rise more, and others have grown accustomed to elevated rates and pushed down their home-price budget accordingly.
^My parents' bought in fall of 2021 at 2.625% APR.
As of this month, houses on their street are selling for +25% of 2021 prices in a couple days. There is limited supply in their neighborhood and people are jumping all over everything that comes on the market.
Everything I read indicates if the home is reasonably priced, so what's that 700,000 or less, it sells and often very quickly.
Tacking an extra $50 or 100k onto the asking price doesn't seem to be any deterrence.