Realtors discuss challenges facing their industry amid higher insurance costs & inflation
NEW ORLEANS (WVUE) - Higher property insurance rates, more expensive premiums for flood coverage, and rising interest rates: a trio of factors that not only impacts personal budgets but also the real estate industry.
On Thursday (Oct. 13) hundreds of realtors and members of the banking community attended an economic and real estate forecast symposium in Jefferson Parish. The theme of the symposium was “Recognizing Risk in an Uncertain World.”
“We are going to see a contraction, we’re already there. We’ve seen seven months of continual reduced existing home sales right now,” said one speaker at the event.
Post-Hurricane Ida, Louisiana is in the grips of an insurance crisis. Some insurance companies failed financially and some others withdrew from the state.
Michael Mito of JPAR Gulf South served as co-chair of the forecast symposium.
He agrees realtors are seeing the effects of the insurance crisis.
“I would think for us here I think the insurance thing is even impacting us more than the inflation,” said Mito.
Insurance costs could have a chilling effect on some people’s willingness to become homeowners in the near term.
“I would definitely say so, I mean, you know, the flip side of that is how could it possibly not when there’s that much uncertainty and all of these things?” said Mito. “The big thing about the insurance is, right, this is an annual cost that comes up and if we’re looking at these rates now the expectation that it’s ever going to go down is, it’s probably never going to go down.”
It is not just residential properties that are impacted by higher insurance premiums.
Russell Bernstein is a commercial realtor and business broker with KW Commercial.
“I think buyers of commercial real estate are going to start leasing because they also, it’s too difficult to get financing; it either takes too long, the interest rates are too high and the insurance is really high,” said Bernstein.
The hefty premium increase recently approved for Louisiana’s insurer of last resort, Louisiana Citizens Property Insurance Corp. does not just impact homeowners but also businesses.
Jim Donelon is Louisiana’s Insurance Commissioner. Donelon approved the rate hike for Citizens.
“Sixty-three percent for residents, 73% for the 6,000 commercial policies is unavoidable. It’s by law required that the market of last resort—Citizens—adjust rates every year to keep them above the highest of the private sector so that it doesn’t become a state insurer of hurricanes,” said Donelon.
Mito was asked how the real estate market will survive given the current circumstances.
“You know, there’s always going to be land, there’s always going to be transactions,” said Mito” “I think we’re definitely going to be in a bit of a slowdown from where we were before.”
Still, some areas of the real estate market are expected to fare better than others.
“I think some of the strongest sectors will be like multi-family and then the rental market; people are going to continue to need housing,” Mito stated.
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