Rising insurance premiums impact homebuying and selling
NEW ORLEANS (WVUE) - Soaring insurance premiums are impacting not just existing homeowners in Louisiana but also some prospective homebuyers. And real estate and closing companies see it firsthand.
Ginger Wiggins is a realtor with Coldwell Banker and serves as secretary-treasurer for the New Orleans Metropolitan Association of Realtors (NOMAR).
“We’re having a lot of different impacts. The market is seeing a lot of just stagnation,” said Wiggins.
She said when insurance costs are factored in, mortgage payments increase substantially for people in the home-buying process.
“It’s not unusual for the insurance premiums to add an additional $600 or $700 a month to your monthly note,” said Wiggins.
The impact is felt on homes priced at various levels.
“You know, as somebody buying $170,000 house or $250,000 house they may not have that extra money,” said Wiggins. “The quotes that we’re getting are just astronomical. I had another agent share with me that a $2 million property that she had a buyer looking at and their first quote was $90,000 a year for property insurance.”
Danny Douglass is an attorney with Crescent Title.
“It’s certainly been a challenging few months, closings are still happening though,” said Douglass.
However, he said the current insurance climate underscores the need for would-be homebuyers to work with a team of professionals.
“A good realtor, a good local lender to get you through the process, make sure a buyer has that team to make that they can get to the closing table, a title company like Crescent Tile has been through this many times over the past 20 years to navigate those waters to make sure that at the end of the day the insurance policy that gets is appropriate for the property that they’re buying and still allows the buyer to afford to be able to purchase the property,” said Douglass.
He said the average interest rate remains in the single digits and added that assuming a property’s existing flood insurance policy can also help.
“We are seeing upper 5%, 6% for a 30-year fixed but again there may be a better product for a buyer, a better way for a buyer to lower their costs is to assume the flood insurance policy that the seller has, that doesn’t always work,” Douglass stated.
Of course, real estate agents and title companies have bills to pay, too, and are affected when sales slump.
“Absolutely, and it’s very scary when you have, you know, high inflation prices, you have higher interest rates,” said Wiggins. “There will be many realtors who will have to seek other employment and seek part-time jobs.”
Douglass said, “The good times never last but the bad times never last, so there’s always cycle and we feel like we’re in an improvement cycle into 2023, where we’re going to see interest rates going down, affordability going up and hopefully insurance will be in line with those numbers.”
Meanwhile, two bills related to financial incentives for insurers advanced again in the legislature. The Senate Finance Committee sent HB1 and HB2 to the full senate for consideration in a special legislative session that must end by February 6.
“From our standpoint, we’re hopeful that these rates will come down, that interest rates will continue to drop,” said Douglass.
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