Insurance is an absolute nightmare and is going to get worse

Here’s how it’s going to play out:

First, Insurance carriers continue to massively increase prices to cover risk or they pull out of high risk states like California, Florida, or Texas

Existing home owners with no mortgage are going to decide to not have insurance. 

These folks are typically retirees on fixed income. They don’t have the money to pay the new high prices for insurance. 

They’ve also typically lived in their house for 30+ years. They won’t move over this. 

The challenge is their house is typically their largest financial asset. One catastrophic loss situation, like a fire or hurricane, and they are financially wiped out

Home owners with a mortgage are in an even tougher position. As part of their mortgage, they are contractually required to have insurance. 

They are a “captive customer.”  The insurance rates go up, and they have to pay it. 

Owning a home is now a nightmare. They are the very definition of “house poor” as insurance absorbs all of the cash they otherwise would spend in a discretionary manor.

I would expect foreclosures to rise a few percentage points here

Home buyers are hosed. They need insurance if they get a mortgage, and mortgage underwriters will NEED a huge income to cover the PITI

It won’t be feasible to buy a home in high insurance risk areas

Cash buyers will drop in frequency since they know they will have insurance risk/they won’t have the “30 year ties” the paid off home owners have

Rental prices dramatically increase in the high risk areas. The insurance prices impact apartment owners and SFR owners too. The only way to compensate is to increase rents

Building also goes down, because builders cannot underwrite a reasonable buyer buying the property once complete 

The real estate economy is hurt. Agents, loan officers, title officers, home inspectors, builders are all hurt. Many leave the industry 

The local economy suffers too as all of these combine to create economic issues 

-small business pays insurance too, and they’re hurt by the cost increase

-discretionary spend businesses (restaurants, movie theaters, entertainment) are hurt because families with mortgages are mix-shifting spend to insurance 

-F500’s struggle to recruit talent to the area due to the cost of housing

All in, I hope I’m wrong about this

However, I’ve yet to hear a plausible argument why insurance costs will stop rising

(The “government will step in” argument has always been impractical, as California’s insurance program is about to be destroyed by this fire)

If insurance costs don’t stop, the second and third order implications get pretty predictable 

I hope I’m wrong. 

But there is a 0% chance I’m putting my investor’s capital and my own capital into California, Florida, or Texas