The housing market is being hit by home insurance shocks—these maps show the most vulnerable areas
This analysis projects which counties are at the highest risk of an “insurance correction” due to fire, wind, and flood risk.
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During the pandemic housing boom, a close friend purchased his first rental property in Fort Lauderdale. A few days ago, he reached out and said his home insurance and property taxes just increased by $500 per month.
This will effectively halve the property’s cash flow. He was shocked.
And he isn’t alone. We’re amidst something of a home insurance shock, and it’s particularly sharp in markets in states like California, Florida, and Louisiana. Several insurers have already pulled out of those states altogether.
On Tuesday, we learned that California’s largest home insurer, State Farm, will raise home insurance rates—among those it didn’t drop outright—in the state by an average of 20%. This change will take effect on March 15th.
To better understand which housing markets might be at the greatest risk of home insurance shocks heading forward, ResiClub reached out to Jeremy Porter, the head of climate implications research at First Street Foundation, for the latest home insurance risk analysis.
First Street Foundation has an analysis that projects which counties are at the highest risk of an “insurance correction” due to fire risk, wind risk, and flood risk. In other words, the share of local properties right now at risk of having home insurance raised or nonrenewed for fire, wind, or flood.
Let’s take a look at the analysis.
Among the 3,075 U.S. counties analyzed by First Street Foundation, 368 counties had at least 50% of local housing properties identified as at risk for "insurance correction" due to wind risk. Of those, 94 counties have 100% of their local counties at risk. Almost all of those counties are along the coastal region stretching from Massachusetts to Texas.
Of those same 3,075 U.S. counties analyzed by First Street Foundation, 46 counties had at least 50% of local housing properties identified as at risk for "insurance correction" due to fire risk. Almost all of those counties are in the West or Southwest. The most at risk county is Andrews County, Texas.
When it comes to flooding, none of the 3,075 U.S. counties analyzed by First Street Foundation had at least 50% of local housing properties identified as at risk for "insurance correction" due to flood risk. The most at risk county is Letcher County, Kentucky (49.6% of local properties are at risk).
One thing to keep in mind with this analysis, in particular for flood risk, is that it's done at a county level. At the ZIP code and neighborhood levels, of course, risk can vary significantly within a county. For instance, where I live in the suburbs of Cincinnati, my home has a low flood risk, while homes just a few miles from mine and closer to the river have a far greater risk.
Keep in mind that homes with low levels of "insurance correction” risk—the risk of having insurance raised or nonrenewed for fire, wind, and flood—can still see their home insurance rates jacked up. In fact, one reason homeowners insurance premiums are rising so rapidly is because construction costs and home prices have surged significantly since 2020, making repairs increasingly expensive.
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