I get the point of the article. But if insurance rates go up 10%, your entire mortgage payment which includes principal, interest, insurance, and property taxes doesn't go up 10%. Of that $3,000 monthly mortgage payment, maybe $140 is the insurance. Meaning that that payment would go up $14 a month to $3,014, not $3,300.
Agreed. Went back and re-read this. This does seem to be a really, really badly written piece. I personally loathe the folksy"let me explain this to you" style when discussing finances.
When we finance we choose fixed-interest ten-year loans. Taxes and insurance premiums are variables and separate. As you note, in the cited 3000 dollar example above, all three costs are bundled together as variable costs to arrive incorrectly at the 300 dollar monthly increase, when in fact only two of the three costs are subject to change. As well, as commenters are pointing out, variable costs vary state to state.
The long-term practice that works best for us over decades has been to maintain zero-percent monthly credit card debt and maintain the best possible credit rating - no missed or late payments on any loan ever.
Might be worth taking down the article, as others have suggested, until all the math has been checked. Most people I know get impatient quickly when folks don't get these kinds of numbers right. Eric might have an argument to make here, he needs to do so clearly.
Doesn't it depend on the insurance rate vs loan payment? I bought a waterfront home in Florida in 1999. My mortgage payment was about $800/mo, and my ins premium upon purchase was about $350/mo. When I sold the house in 2003, the premium was about $700/mo. Rates then continued to go up. I saw a few rates for homes like mine in my old neighborhood around 2012, and they ranged from $1,000/mo to $1,250/mo. So, had I still owned the home, my insurance premium would've been substantially higher than my loan payment.
I have no idea what rates are today, but it's my opinion that the days of average Americans owning waterfront homes are over. Waterfront home prices have risen a lot, but that's not the killer. It's the insurance premiums that'll get you.
Wow! Yeah, if I was going to guess the range for my old house, it would be in the $20k/yr range. It's really quite crazy when you think about it, because in a mere 10 years, one could stash, say, $200K into safe investments that could easily yield enough (in a catastrophic loss) to provide a substantial start - and it's in your account, you're not dependent on the good will of an ins company. And that's all in 10 years, by 20 years, you'd be set.
I guess what I'm saying is, that insurance companies should be a service towards financial freedom, which shouldn't be cheap, but should be affordable. But instead, they're a method of economic enslavement.
Well, yes and no. There's the issue of what "over valued" means. I sold my house in 2003 for a $100k profit. The purchaser decided to sell in 2007 for what would've been a $200k gross profit to me. However, he was unable to sell before the crash. He eventually sold the house around 2014 for what would've been a $175k gross profit for me. He made about $75k gross profit. However, it was quite expensive living.
The issue gets down to this: what are the insurance company's goals It's my opinion, that their goals are to take American citizens for whatever they will stupidly give them, and then tell them, "Oh Shit! This disaster is WAY to big for us to handle! We're bankrupt! Sorry, but there's only pennies on the your dollar of insurance. We're so sorry!"
I think it would also be fair to point out that not all of the price increase is due to previous disaster payouts. Inflation accounts for a large portion of the price increases. A dollar just don't buy what it used to.
The days of the federal government subsidizing insurance for people in flood plains are over. Building should never been allowed there - see “Superstorm Sandy “.Same with building in fire prone areas without proper control of the undergrowth - see Pacific Palisades.
The math might be off, but the homeowners insurance problems are very real. Here in New York a long history of courts favoring plaintiffs in bogus slip and fall lawsuits, and favoring fake and inflated storm and water damage claims against insurers, has led to cancellation of thousands of policies by insurers, including mine. Luckily my Mortgage was paid off so there were no immediate consequences - typically the lender would have "called" the entire principal balance of the note due within, say 60 days, then, if it isn't paid, commence a foreclosure proceeding. The long-term consequences of being un, or under-insured could be catastrophic, however.
The result of all this is going to be the addition of a chaotic wrinkle to the housing market, which will create a ripple effect across the entire economy.
One path to sanity would be to elect and/or appoint more conservative judges who are willing to follow the law rather than the money from campaign contribtions by personal injury law firms, or some vague social justice agenda. Unfortunately this is something that can only happen with the consent of party gatekeepers, which doesn't seem likely in the near future.
Not necessarily. In CA, the CalFair plan often only covers the mortgage amount and you can't get replacement cost. Depends on your fire zone. More likely to have a wildfire, less coverage. Basically, they are the insurer of last resort here and only exist to cover the banks. And rebuild costs are hard for insurance companies to figure. I lost my home to wildfire in 2020 and thought I'd insured for a rebuild. I was $500K underinsured. This is why all the insurers were leaving CA, people can't afford to pay for that amount of insurance. It's a total mess here. I pay $3200 a year to insure my land and three tiny homes on wheels in CA. I have a condo in Chicago and only pay $758 a year for a 3 bedroom. It went up $50 in the last year. I consider it a deal.
California politicians have completely screwed up our insurance markets by enacting rules and setting rates that guarantee a loss for insurers. The result is that most have left the State and aren’t writing new business. This is yet another problem created by government that blames others and seeks to solve the problem it created.
I don't understand your thinking. If you have only 100k left on your mortgage and your house has a value of 500k and it has a total fire loss you would expect the insurance company to pay............100k??
Bull shit. Homeowners insurance rates have almost nothing at all to do with the fucking mortgage. The average premium in February 2024 was about $141 a month for a home with $250,000 worth of dwelling insurance. That’s a 23% increase from January 2023.
$14 my ass and already 5 "likes" LOL. That's if you can even GET insured. Try California, Florida or the Gulf Coast of TX, LA or MS. This site's comments are trash.
The "likes" comment coming from a guy who "likes" his own comments is hilarious. You sound perpetually angry, Tom, please try not to play with anything sharp today...
There you are with your bullshit about joining (now) 8hrs ago. You have no idea WTF you're talking about. You need to improve your substack stalking skills, Rugburn Man. 🤡🤡🤡
"Written," or more likely "compiled," by someone else. Yes, quite obviously. Another helpful Racketeer. "Eric Salzman" appearing under the headline gave it away for me.
But, alas, the piece does appear under the banner ("Racket") of Taibbi's website. It's a Taibbi piece. True, it does not quite successfully achieve the levels of Taibbi's own maudlin tales of MAGA woe, but one is inclined to note the effort nonetheless.
I second Patrick's curiosity. It's confounding to see people in the comment section that mock Taibbi's reporting, as though they weren't paying for it.
The $14 number is only used to make the point that a 10% increase in insurance - whatever the absolute amount - does not mean a 10% increase in total monthly payments.
I think you are both correct, but the difference is the location. A few months back I was comparing homeowners insurance in West Virginia, Maryland and Florida. The annual rates were about $800, $1600 and $3000 respectively. The homes were approximately the same size, but size, quality and location definitely will make a difference. Hurricanes, flooding, tornadoes and other regular storm related occurrences have to play a part as well. Inflation is probably the biggest culprit. Florida is especially being hit hard. Melody Wright and others following home sales trends have been reporting on this for years.
Location is the most important factor in house insurance RISK. Not necessarily the cost you pay, but the risk incurred by the insurance company. Cost needs to reflect risk, and risk is directly associated with the address of the house.
Citizens insurance in Florida is trying to weasel out of paying claims, cancels policies seemingly at random, and deliberately delays paying off claims.
We're in Santa Cruz CA, an area that went through a wildfire in 2020. The entire zip code has gone up, but here's one example from a friend down the street: It was already $3K in 2019. Went up to $7K after the fire. Her most recent bill? $13,000 annually. She's retired and still has a mortgage, given the fact the house was so expensive to buy. But at least she has insurance. Most people around her were dropped and are now on the CalFair plan for about the same amount every year, but not as well insured. And LA will bankrupt that plan soon, so I'm not sure what will happen.
Well, "Tom" as you just signed up - 4 hours ago, according to your profile on SS - we know you are a troll. Who is paying you? A certain elected official in Cali? LOL!
Interesting that "SS" tells you I just signed up 8 hours ago - obviously total nonsense or you are just too stupid to understand what you're seeing on your screen. But thanks for trying to check... because you're a clown.
Can you tell us you see about the rug burns on your knees and elbows? Not that anyone else will need their services, but they need to know you're having an "event" and need help, quickly.
Hi Arbee - perhaps you saw my note to another commenter earlier. We have made a correction to the article and updated it with additional information as well. Thank you for writing.
Correction: This story has been updated to correct an error we made in calculating an increase in monthly mortgage payments resulting form higher homeowners insurance premiums. We also added additional information from a study that the Minneapolis Fed wrote about last year.
This is just my opinion, but I think that to make the financial point of the article, that increased payments put some homeowners at risk of default, it should focus on the specific areas of the country where insurance rate increases have hit hardest.
I live in VA and while it's unpleasant that insurance rates have increased so rapidly, we are pretty much in the category mentioned in the article; our rates have increased by hundreds of dollars resulting in a marginal increase in our mortgage payments.
However, I have family members in south FL who are now paying close to $6,000 per year in rates compared to $2,200 just 5 or 6 years ago resulting in large increases in their payment. And of course there is CA and other areas of the country at risk from hurricanes, floods, and fire.
I like that the article focuses on the financial aspects rather than demonizing the insurance companies. You can't expect them to continue covering homes from fire and flood that are rebuilt in the same areas without mitigation. Also, the inflation of the past few years have increased the costs to rebuild.
Unfortunately since we all need insurance, all of us have to shoulder some of that burden.
Yes; I live in New Mexico (in the top ten according to the chart); I'd bet that increase was driven by the fires in Santa Fe/Los Alamos a few years ago. More expensive houses in or near fire-prone forests is going to drive up premiums.
If a homeowner's increased insurance costs forces them into foreclosure then I submit they were WAY over leveraged to begin with and shouldn't have been in the home in the first place.
Your math is wrong. If insurance goes up 10%, how does my payment go up 300 a month unless my insurance is 36,000 a year. Your also mixing up mortgage insurance with property insurance. I’d take this article down and a financial professional review it before reposting.
You are absolutely right. I apologize for the error. We have updated the story and noted the correction. Thank you for writing - and thanks to others as well.
"Property insurance"? What's that? Homeowners vs. mortgage? Mortgage insurance is a non factor when you've paid 20% of the equity. Usually goes away after about 3 or 4 years of making payments. Homeowners (fire/flood/earthquake/major system) insurance is nearing impossible to even get in many cases in states like Florida or California. Care to research the actual prices of that?
Not saying they'll even pay out half the time, but if you need it, it's not cheap and getting worse...for a reason. I seriously doubt you even live in the US, or if you do you're a trust fund brat with a financial affairs manager.
You don't know what the hell you are talking about. PMI doesn't go away in 3-4 years if you put down 20% equity. If you put down 20% equity, you didn't have PMI in the first place. I'm sure there are localities where homeowner's insurance is difficult to obtain at a reasonable rate due to changes in insurance loss rates, state insurance commission policy changes etc., but nationwide homeowner's insurance rates are mostly up due to inflation in (re)building costs.
Nobody said anything about "putting down" any percentage you idiot. I said once you've got roughly 20% of the equity paid off the mortgage insurance comes off the payment, or is no longer required. Now, if in your state or whatever jurisdiction you're in you can pay a certain percentage amount down (up to and including the whole cash price, duh) - which would not surprise me - then perhaps you can obviate the need for mortgage insurance altogether.
No mortgage insurance is not the same thing as property insurance which covers damage and replacement costs. In Texas the cost of insurance on a $580,000. property is $3,500. which is about $291. a month if you add 10% you'll be paying $320. It is very likely that when you add property taxes that the amount you pay into escrow is higher than the amount you pay towards your loan and that is significant no matter what the trolls say. If you want to avoid PMI you can take out a second smaller loan which can be paid back in a more timely fashion but PMI has nothing to do with property insurance that you have to maintain even when you pay cash for the property.
"No mortgage insurance is not the same thing as property insurance".
THANK YOU. There is a lot of confusion in the comments. PMI is imposed by mortgagees. They make you get insurance for the mortgage and the policy is written in favor of the mortgagee - the lender. Homeowners insurance includes not merely the building(s) itself, but also liability to folks on the property. And you can decide how much to cover, deductibles,, etc. Two different things!
Folks my homeowners insurance jump 57% the past renewal yet it’s only 60 more per month. I live in the failed state of Illinois where the RE Taxes are now more than the mortgage payment is itself. The insurance companies are all suffering from the broken market in California where they have been prevented from pricing for the actual risk they are taking on. These are national insurance companies and we in the other 49 states are picking up the slack and after those fires in California it’s only going to get worse. Want to lower your insurance fire the Democrats
The costs of wildfires for insurance companies are overstated, because 1) they conveniently forget about indemnification from utility companies; and 2) their exposure is mostly through CalFAIR plan. Which is an insurance pool with an average premium of $600/month for an average CA home. Multiply that by 2-3 for more expensive zip codes.
CalFAIR plan now has almost half a million policies - after insurance companies have been canceling them by tens of thousands. In my area (high wildfire risk) the number of CalFAIR policies went up 5-fold over the last 4 years. And the premiums in this plan are going up yet again - this year, somewhere about 20%. Because it is this plan - not insurance companies - that will go broke unless policyholders pony up the money to cover the losses.
But under the guise of "wildfire losses", insurance companies were allowed to shamelessly rip off customers in low risk areas. Premiums are going up by 10-15% all throughout CA. Sometimes a lot more than 15% - for instance, my friend's HOA insurance (middle of downtown, zero wildfire risk) has just tripled. Why? Because otherwise insurance companies threaten to pull out of CA!
So all that tripe about "other states picking up the slack" - is just that, the tripe spouted by insurance companies and their puppet - CA Insurance Commissioner Ricardo Lara. The most corrupt of corrupt CA Democrats.
You beat me to this comment. I’m also in Illinois, hoping to escape in the next year or two. Property taxes are out of control, and tent cities are popping up in all of the parks. Total government failure.
My husband and I for the first time in our 50ty years of marriage had an argument regarding bundled home and car insurance rates. Our house is paid for and we are at the end of our days. Property taxes doubled this year (yikes!) and Social Security, based on our average salary over the years of $50,000, has not gone up. If he dies, I decided I would not insure the house, so i can afford to live in it with his SS. He, protector that he is, opted to pay the insurance. I lost. I think we are just paying for other disasters, though after the fires in HI, the NC tornado route and CA fire, I see that there were no insurance guarantees, nor fema assistance in most cases. So if my dear husband dies before me, I’ll probably keep the auto liability (to cover those without insurance) on my paid cars, but scrap the home insurance and figure the land will still be salable for my children. Luckily I raised them self reliant, responsible, and resilient. The insurances connected to health care, house/property holdings, and car coverage are in themselves a “liabilities” to me.
Yes - if you have a mortgage, always check to see what the maximum deductible they allow is. $5000 deductible is pretty common now and was no issue with my servicer
These are the exact reasons why the national government is cutting all spending and raising revenues via tariffs. Guys who work in the macro capital markets like Druckenmiller and Tudor Jones and the current Secretary of Treasury have been knowing this and saying this for a long time.
Did you not read the OP comment with comprehension?
Their social security is stagnant . Their taxes and insurance are increasing because of inflation (and if an increasing number of reports be true, TdA acts of arson). In short, they can’t afford to live.
These are precisely the reasons why the current administration has to slash spending massively and increase revenues without raising taxes. And as they have repeatedly explained, these are the reasons why they are taking those steps.
It’s not that difficult to understand how those steps directly help people exactly like OP.
I whole hardily endorse all the Doge cuts and tariffs. The administrative choices made in the last 40ty or more years, if continued, would have lead to a dead end street. I was yelling 20ty years ago when industry was leaving America. Why is three houses, a boat, plane, and 3 cars with first class vacations more important then building in America and enriching our countrymen here.? The money and power greed is way beyond me. As Batya Sargon put it: “…with manufacturing (by the middle class) comes creativity.” The ground/floor workers know inefficiency and efficiency as well as craftsmanship and practicality. And that is what made in America used to mean. The elites running to the cheap factories elsewhere forgot this big plus. Getting back to the Trump and Elon ceo/tech/business agenda, I’ll gladly live on P&J sandwiches in order to save social security, have affordable homes &health care with good solid jobs.
Do I comprehend? Haha. No because you are full of shit and just listen to whatever this administration feeds to you. I was trying to be nice but you are being a pompous prick about it. Social security is funded by employers and employees being taxed. Not the revenue from tariffs. Taxes aren’t just some blanket thing that goes everywhere. Of course you would blame immigrants. Sure, they use someone else social security number to work, but guess what…they put into the social security fund and never get the benefit when they retire. So they are actually funding our retirement more than your precious tariffs. Do you comprehend? I swing a hammer for a living and I do. All your arguments-Tariffs , immigrants, etc have nothing to do with this article.
Han, will the government eventually still be taking money for SS out of pay checks or will the money from tariffs fund this if they, indeed, cancel some or all taxation? Maybe people can be responsible for their own retirement. I think Bush floated this by at one time. Not too sure about trusting people on this. A lot of people focus on instant gratification and that’s why credit card debt is bad.
Still not making the tariff connection clear enough. What does government revenue or lack there of have to do with the insurance companies? Also, you realize that social security is its own trust right ? It doesn’t have anything to do with that national debt. Also, how are tariffs going to raise revenue in things are to expensive to buy? Is these tariffs were to work , they most likely won’t, we won’t feel the positive effects for years. Maybe even decades. How is that supposed to solve the social security payout problem that is supposed to happen in the 2030s?
The major factors for skyrocketing insurance are multiple catastrophes, and inflation. Inflation to the consumer is one thing, but for insurance it is lethal. We saw these same kinds of things in the 1970s.
Social Security is its own trust sure, and it is a trust that is funded by taxation. Aside from (and in addition to) the gigantic immigrant fraud that is being found , where they are receiving medicare simply because they have an ssn, the SS administration is running out of money. WE CANT RAISE TAXES ON OP AND TENS OF MILLION OF PEOPLE JUST LIKE OP WHEN THEYRE ALREADY AT THE EDGE FINANCIALLY.
That is why they are raising revenues massively with tariffs. And you are wrong about the delay. Every purchase of foreign products under tariff sends a payment to the treasury, and makes social security that much more solvent.
The administration talked about this on the campaign, they talked about it the first week in office, they’ve been talking about it ever since. Do you not comprehend or do you just not listen at all?
To be fair, hurricanes and wildfires are causing more damage simply because there are far more homes being built in harms way. If you buy a home close to the ocean, you should be required to self-insure. If you buy a home in a historic fire corridor... well that makes you an idiot. Insurance companies are for-profit businesses. They should never be required to accept risk by governmental agencies because that endangers the entire system.
Insurance SHOULD be based on the cost of replacing the asset multiplied by a factor associated with the risk of damage (small or large damage). Real estate prices have gone up considerably. The cost per sqft to build has also risen quite a bit. If housing prices double, for some strange reason, the cost to build them seems to double too. I am not sure I buy that, but that is what the market is doing (are all those construction guys now getting paid double - the ones from Guatemala???).
When I lived in CA, it was apparent to me that all those cliff side homes were built because of the view, but also because that was the only land available. This is because before there was such an insurance market, nobody was dumb enough to spend a lot of money on unstable land and then lose it in the next El Nino. Same with beach houses. Nobody who wasn't named Vanderbuilt would put a mansion on the coast. And their mansions were built to far different standards than our current beach front mansions. I grew up in Miami. As a kid, I noticed all the houses were the same low slung roofs and cinderblock walls. Only someone named Flagler or some very rich person would build a huge house. And there weren't many of them (they are all museums now).
It seems to me as a bit of a math nerd, that people in FL and those people in CA were not paying for the risk associated with their properties. Instead, THEIR risk was spread out across the country. THIS allowed them to afford to build expensive houses in risky areas. It is time that we return to risk factors associated with the house. Where it is, what it costs to build it there, and what the risk is in that street address. I am thinking of moving to FL and am looking at lots in an area that is in the path of hurricanes. I notice (and noticed in Miami) that there is some high ground. And by high, maybe 10 or 15' higher than the rest. All this is in flood plain maps. The insuring of a house is a distinct thing. Each houses's risk is very well understood. It is time that the risk of each and every distinct house be reflected in the cost of its insurance. We have computers these days, it is a simple calculation.
This is exactly right. Make people bear the cost and risk of building their home. Also it allows climate fear porn, because now every hurricane sets a new record for "most destructive" and it's not due to strength of hurricane but the millions of homes we're building in it's path.
Such a system might encourage people to buy homes built properly to protect them from natural disasters. Are you building in a fire-prone area? Then build with concrete or hempcrete walls and use unvented metal roofs. (In reality it is more complex than just changing building materials, but we do have booklets on this now--I am just saying, there are ways it can be done).
But as it is you could do everything perfectly (and pay a bit more to do so) and the insurance company might throw you a 5% discount. And building the home right probably increased the construction cost by at least that much, meaning you wind up paying about the same (or more) for insurance anyhow.
Sure you could try recouping the cost by going without wildfire insurance--but only if you own the home outright. And once you sell, any buyer using a bank loan will still be forced to pay for the nearly-useless and absurdly expensive wildfire policy too.
If insurers really are spreading the pain of stupid, local building decisions around nationally then that is a story worth pursuing. I, for one, don't want to subsidize property built in a flood plane, or built (without proper protections) in a fire risk area. I know things are changing, and places that were acceptably risky 10-20 years ago are not at risk of being uninsurable. So it would be good, I think, for insurance premiums to be determined solely by individual risk, and then where private insurance becomes too expensive the government can provide subsidized property insurance--but only until the home is destroyed, and only for the current replacement value (no expansions to homes getting subsidized insurance). Once disaster hits though, there should be a buyout offer and then no more subsidized insurance on that property.
If you want to discuss the REAL category 5 housing crisis, it's that people are being priced out of both owning and renting.
Part of that is because of zoning restrictions which have limited the building of new housing for ages.
Part of that is because prior to the Covid-19 pandemic, the professional-managerial class was stuck living in the cities where they worked and during it, they were all remote-working and moving to areas where housing had been cheap. Supply and demand. They moved, created new demand, and new higher prices moved with them.
Part of that is that housing has been bought up by big companies that jack up rents.
Part of that is because materials costs rose during/after Covid and haven't come down appreciably. Almost none of it is the cost of labor because those who are profiting aren't trickling those profits down to the people they hire. They might pay an additional 5%-7% but they're making a hell of a lot more.
Insurance? Yeah, that's an issue, because it rises with the resale value of your home. And with all the above (and more) happening, virtually all homeowners have seen valuations rise on paper. And the higher valuation requires insurance that covers the full value.
In my area, housing has gone up about 90 to 100% in the 10 years I've lived here. I'm sure it's similar in other places. Florida, where I used to live, is about the same.
Has everyone's income gone up 90 to 100%? No? There's your Cat 5.
Floridas prices are dropping dramatically, especially Miami Beach. I’ve read some older condo buildings special assessments are up $200,000 -$300,000k per unit (new rebar major structural repairs).
When the foreign owners or anonymous LLCs disappear and abandon the assessments, that’s an additional 12 magnitude earthquake thrown on top of the storm.
«If you want to discuss the REAL category 5 housing crisis, it's that people are being priced out of both owning and renting.»
That is a *boom* not a *crisis*, for those who matter. In every situation ask "for whom?"...
«Part of that is because of zoning restrictions which have limited the building of new housing for ages.»
That is just a symptom. The real reason is that the remaining "good jobs" are concentrated in a few areas and to get within commuting distance of a "good jobs" area one must pay. Property prices and rents have been falling, sometimes from decades, in those areas where the "good jobs" have been offshored.
«In my area, housing has gone up about 90 to 100% in the 10 years I've lived here. I'm sure it's similar in other places. Florida, where I used to live, is about the same. Has everyone's income gone up 90 to 100%? No?»
"Everyone" is a pointless generalization. There are those who matter and those who do not matter and those who matter have had booming incomes since Reagan. Here is a cartoon from "The Economist" depicting some of those who matter:
Sorry, Matt, but your author here lost any value in this article - and credibility with regard to any other points he would try to make - with his first, glaringly obvious error in his example regarding insurance increases potentially resulting in a 10% jump in total payment. His example indicated to me he has limited understanding of a mortgage loan and components of monthly payments. Caused me to stop reading right there. I am not going to spend time digesting and analyzing any of his other points when such a basic example is so obviously incorrect. Calls into question anything else he may have presented in the article. It’s a shame as this insurance situation could become extremely severe and impactful.
Matt take a close look at your math on the insurance rate affecting a monthly payment where escrow is included in the total. It’s still a major problem, of course, but the example is over stated.
I'm an insurance agent. If you get a 10% increase at your home renewal you're very lucky. I know this isn't the point of the article, but car insurance premium increases are higher than that, especially if your a risky category. It's a vicious cycle. Your premium subsidizes the people who drive uninsured. As inflation soars more people decide to take the risk of driving un insured. The remaining insurance holders premium increase, the cycle continues. I see 20 year old boys with just normal kid stuff like a small accident and a speeding ticket on their record paying $6-7000/year if they're not on their parents insurance. And "affordable" cars like kias and hyundais have the worst claims probability so they can't even save money there. It's a mess. Yet another pressure forcing young boys to give up and drop out. How can you afford to drive to work paying a $1000 /month in car payment and insurance at minimum wage?
«Yet another pressure forcing young boys to give up and drop out. How can you afford to drive to work paying a $1000 /month in car payment and insurance at minimum wage?»
The culture in the USA is "winners take all" and "devil take the hindmost" and people like that are considered "losers": why don't they get a well paid job at Halliburton, General Dynamics, or Goldman Sachs? Anybody call apply! :-)
This is a story where the averages may not be as revealing as the details. For instance, I live in New Mexico which is in the top ten on the chart, yet my home insurance has not gone up. This leads me to wonder if this is largely being driven by homes in the Santa Fe/Los Alamos area (areas full of very expensive homes bordering on national forests or other public lands) that were affected by the catastrophic wild fires a few years ago. So it's similar to California in that regard.
Not that this invalidates your conclusions; it just bears more detailed analysis. For instance, the Albuquerque housing market is still very hot. Is a similar thing happening with insurance rates there? Or is it just the expensive homes in the Rio Grande Bosque (which is an area that burns frequently)? It would be interesting to know...
Part of the problem facing homeowners in areas with lower loss ratios is that a portion of their premium goes to cover underwriting losses in higher risk areas. While this is part of the traditional model for insurance, it has been skewed by state insurance commissioners forcing companies to take on risk at lower-than-appropriate rates by limiting rate increases or withholding license to write policies in lower-risk areas unless they take on policies in higher-risk areas and at rates they limit to levels that do not reflect that risk. The recent catastrophes at bookend locales of the country are prime example. North Carolina losses were from a near-impossible-to-predict natural occurrence and would not have been a large impact on premiums pre-storm. Those excess losses are properly spread among the policyholder base. The Pacific fires were much more predictable, in fact many companies had sought to reduce their exposures and increase rates to prepare for those losses. I am not defending any of the companies, however it is also my understanding that the CA insurance commissioner provided something of an ultimatum: Either write the policies and price them at rates he considered acceptable, or leave CA. Those are forced risks; the CA commissioner essentially forced policyholders outside of CA to pay for those risks. Those costs should not be borne across the policyholder base.
«The Pacific fires were much more predictable, in fact many companies had sought to reduce their exposures and increase rates to prepare for those losses. [... ] Either write the policies and price them at rates he considered acceptable, or leave CA. Those are forced risks; the CA commissioner essentially forced policyholders outside of CA to pay for those risks.»
It is was a very simple choice: CA voters are obsessed with property profits and vote on property valuations even more than elsewhere and the CA commissioner protected the profits of affluent CA property speculators and their votes for the governing party at the expense of voters outside CA: a win-win! :-)
More broadly speaking I have recently thought that the real divide in the USA is between those for whom "Proposition 13" makes a lot of money (and so they support offshoring, immigration, financialization, ...) and the others, and the others are in large part Trump's base.
Homeowners insurance has gotten ridiculously expensive....so much so that our insurer sends out "warning" letters several months before it's due...We've had at least a $300 increase each year forat least the last few yrs...and one year it jumped by over $500... and the other kicker is ...this is for less coverage & higher deductibles....& this is in the upper midwest...
Same here in Kansas. And an even bigger issue is insurers are cancelling policies in entire older neighborhoods because they're in financial trouble. The excuse they use is "too many trees." Then the homeowners are left scrambling for coverage at any price.
This is a very real issue where I live, near the Texas coast. Our nice but not lavish 2800 sf home, miles from the water, is valued around $500,000 and our property taxes -- even after the legislature moving to cap increases and including our homestead exemption -- cost us $9000 a year and our insurance went up to $5300. That's $1200 a month going into escrow for a very ordinary home. Our payment went up $400 recently to cover increases in both. We can absorb it but many can't. Then what?
We were under contract on a house closer to the ocean last year and our insurer wouldn't even write a policy for it, so we had to talk to an independent broker, and they cobbled together coverage that was prohibitively expensive so for that and other reasons we withdrew our offer. The house never did sell. There are thousands of homes in that area of the city - what happens when they become literally or practically uninsurable? There are only so many cash buyers who also are willing and able to self-insure.
My fear is that the only entities able to absorb these costs will be giant real estate conglomerates who will become my children's landlords because personal ownership of homes will evaporate.
I get the point of the article. But if insurance rates go up 10%, your entire mortgage payment which includes principal, interest, insurance, and property taxes doesn't go up 10%. Of that $3,000 monthly mortgage payment, maybe $140 is the insurance. Meaning that that payment would go up $14 a month to $3,014, not $3,300.
Agreed. Went back and re-read this. This does seem to be a really, really badly written piece. I personally loathe the folksy"let me explain this to you" style when discussing finances.
When we finance we choose fixed-interest ten-year loans. Taxes and insurance premiums are variables and separate. As you note, in the cited 3000 dollar example above, all three costs are bundled together as variable costs to arrive incorrectly at the 300 dollar monthly increase, when in fact only two of the three costs are subject to change. As well, as commenters are pointing out, variable costs vary state to state.
The long-term practice that works best for us over decades has been to maintain zero-percent monthly credit card debt and maintain the best possible credit rating - no missed or late payments on any loan ever.
Might be worth taking down the article, as others have suggested, until all the math has been checked. Most people I know get impatient quickly when folks don't get these kinds of numbers right. Eric might have an argument to make here, he needs to do so clearly.
Doesn't it depend on the insurance rate vs loan payment? I bought a waterfront home in Florida in 1999. My mortgage payment was about $800/mo, and my ins premium upon purchase was about $350/mo. When I sold the house in 2003, the premium was about $700/mo. Rates then continued to go up. I saw a few rates for homes like mine in my old neighborhood around 2012, and they ranged from $1,000/mo to $1,250/mo. So, had I still owned the home, my insurance premium would've been substantially higher than my loan payment.
I have no idea what rates are today, but it's my opinion that the days of average Americans owning waterfront homes are over. Waterfront home prices have risen a lot, but that's not the killer. It's the insurance premiums that'll get you.
In my town of Santa Cruz, CA, new policies are ranging from $13K-30K a year.
Wow! Yeah, if I was going to guess the range for my old house, it would be in the $20k/yr range. It's really quite crazy when you think about it, because in a mere 10 years, one could stash, say, $200K into safe investments that could easily yield enough (in a catastrophic loss) to provide a substantial start - and it's in your account, you're not dependent on the good will of an ins company. And that's all in 10 years, by 20 years, you'd be set.
If.....you didn't have a mortgage that is your choice. If you have a mortgage then the bank will not be willing to accept such a risk.
I guess what I'm saying is, that insurance companies should be a service towards financial freedom, which shouldn't be cheap, but should be affordable. But instead, they're a method of economic enslavement.
I think the prices are saying these homes are, by orders of magnitude, over priced and over valued.
Well, yes and no. There's the issue of what "over valued" means. I sold my house in 2003 for a $100k profit. The purchaser decided to sell in 2007 for what would've been a $200k gross profit to me. However, he was unable to sell before the crash. He eventually sold the house around 2014 for what would've been a $175k gross profit for me. He made about $75k gross profit. However, it was quite expensive living.
The issue gets down to this: what are the insurance company's goals It's my opinion, that their goals are to take American citizens for whatever they will stupidly give them, and then tell them, "Oh Shit! This disaster is WAY to big for us to handle! We're bankrupt! Sorry, but there's only pennies on the your dollar of insurance. We're so sorry!"
It's a big fat con.
I think it would also be fair to point out that not all of the price increase is due to previous disaster payouts. Inflation accounts for a large portion of the price increases. A dollar just don't buy what it used to.
The days of the federal government subsidizing insurance for people in flood plains are over. Building should never been allowed there - see “Superstorm Sandy “.Same with building in fire prone areas without proper control of the undergrowth - see Pacific Palisades.
The math might be off, but the homeowners insurance problems are very real. Here in New York a long history of courts favoring plaintiffs in bogus slip and fall lawsuits, and favoring fake and inflated storm and water damage claims against insurers, has led to cancellation of thousands of policies by insurers, including mine. Luckily my Mortgage was paid off so there were no immediate consequences - typically the lender would have "called" the entire principal balance of the note due within, say 60 days, then, if it isn't paid, commence a foreclosure proceeding. The long-term consequences of being un, or under-insured could be catastrophic, however.
The result of all this is going to be the addition of a chaotic wrinkle to the housing market, which will create a ripple effect across the entire economy.
One path to sanity would be to elect and/or appoint more conservative judges who are willing to follow the law rather than the money from campaign contribtions by personal injury law firms, or some vague social justice agenda. Unfortunately this is something that can only happen with the consent of party gatekeepers, which doesn't seem likely in the near future.
Beat me to it with that math! Also PMI insurance is only for mortgages that are above 80% of the bank appraised value of the home.
What IS incredibly annoying is that a borrower is required to have insurance that covers the replacement cost of the home vs the mortgage amount.
Not necessarily. In CA, the CalFair plan often only covers the mortgage amount and you can't get replacement cost. Depends on your fire zone. More likely to have a wildfire, less coverage. Basically, they are the insurer of last resort here and only exist to cover the banks. And rebuild costs are hard for insurance companies to figure. I lost my home to wildfire in 2020 and thought I'd insured for a rebuild. I was $500K underinsured. This is why all the insurers were leaving CA, people can't afford to pay for that amount of insurance. It's a total mess here. I pay $3200 a year to insure my land and three tiny homes on wheels in CA. I have a condo in Chicago and only pay $758 a year for a 3 bedroom. It went up $50 in the last year. I consider it a deal.
California politicians have completely screwed up our insurance markets by enacting rules and setting rates that guarantee a loss for insurers. The result is that most have left the State and aren’t writing new business. This is yet another problem created by government that blames others and seeks to solve the problem it created.
Reason Magazine has written extensively about Californias price controls on ho insurance.
I don't understand your thinking. If you have only 100k left on your mortgage and your house has a value of 500k and it has a total fire loss you would expect the insurance company to pay............100k??
Bull shit. Homeowners insurance rates have almost nothing at all to do with the fucking mortgage. The average premium in February 2024 was about $141 a month for a home with $250,000 worth of dwelling insurance. That’s a 23% increase from January 2023.
https://www.cnbc.com/select/homeowners-insurance-skyrocketing-how-to-lower-premium/
Now talk to us about a house "worth" $550K.
$14 my ass and already 5 "likes" LOL. That's if you can even GET insured. Try California, Florida or the Gulf Coast of TX, LA or MS. This site's comments are trash.
Sounds like you better hope anger management insurance doesn't rise any time soon.
Badabing!
;)
The "likes" comment coming from a guy who "likes" his own comments is hilarious. You sound perpetually angry, Tom, please try not to play with anything sharp today...
The fuck are you on about, dipshit?
Try to be respectful. It's actually rude comments like yours that make the comments section trashy.
Nah, the comment sections can be fun. Now "Tom" is outted and we can see if he ever shows up again.
BTW, he is quite new here. his profile says he joins Racket News 4 hours ago!
There you are with your bullshit about joining (now) 8hrs ago. You have no idea WTF you're talking about. You need to improve your substack stalking skills, Rugburn Man. 🤡🤡🤡
I'd say often the content of Taibbi's pieces contribute mightily to the trashiness of the comments section.
This is written by someone else actually
"Written," or more likely "compiled," by someone else. Yes, quite obviously. Another helpful Racketeer. "Eric Salzman" appearing under the headline gave it away for me.
But, alas, the piece does appear under the banner ("Racket") of Taibbi's website. It's a Taibbi piece. True, it does not quite successfully achieve the levels of Taibbi's own maudlin tales of MAGA woe, but one is inclined to note the effort nonetheless.
Why do you subscribe?
I second Patrick's curiosity. It's confounding to see people in the comment section that mock Taibbi's reporting, as though they weren't paying for it.
Ah, so you've got a problem with Monkey Business? Why am I not surprised with your comment?
I get your sentiment, but I believe he's correct about the math.
He's wrong if we're talking about any of the states I mentioned. $14? Come on. Laughable.
The $14 number is only used to make the point that a 10% increase in insurance - whatever the absolute amount - does not mean a 10% increase in total monthly payments.
I think you are both correct, but the difference is the location. A few months back I was comparing homeowners insurance in West Virginia, Maryland and Florida. The annual rates were about $800, $1600 and $3000 respectively. The homes were approximately the same size, but size, quality and location definitely will make a difference. Hurricanes, flooding, tornadoes and other regular storm related occurrences have to play a part as well. Inflation is probably the biggest culprit. Florida is especially being hit hard. Melody Wright and others following home sales trends have been reporting on this for years.
Location is the most important factor in house insurance RISK. Not necessarily the cost you pay, but the risk incurred by the insurance company. Cost needs to reflect risk, and risk is directly associated with the address of the house.
Citizens insurance in Florida is trying to weasel out of paying claims, cancels policies seemingly at random, and deliberately delays paying off claims.
They may be but you have the option to sue. Judges routinely spank them in court but no one really pursues suing.
We're in Santa Cruz CA, an area that went through a wildfire in 2020. The entire zip code has gone up, but here's one example from a friend down the street: It was already $3K in 2019. Went up to $7K after the fire. Her most recent bill? $13,000 annually. She's retired and still has a mortgage, given the fact the house was so expensive to buy. But at least she has insurance. Most people around her were dropped and are now on the CalFair plan for about the same amount every year, but not as well insured. And LA will bankrupt that plan soon, so I'm not sure what will happen.
Dude, are you a fishing guide in FL??
Well, "Tom" as you just signed up - 4 hours ago, according to your profile on SS - we know you are a troll. Who is paying you? A certain elected official in Cali? LOL!
ROFLMAO are you stalking me, Rugburn Man?
Interesting that "SS" tells you I just signed up 8 hours ago - obviously total nonsense or you are just too stupid to understand what you're seeing on your screen. But thanks for trying to check... because you're a clown.
Get a life, loser. 🤡🤡🤡🤡
Dude, see your therapist. Very soon.
Can you tell us you see about the rug burns on your knees and elbows? Not that anyone else will need their services, but they need to know you're having an "event" and need help, quickly.
You’re not talking about the same thing. That 23% you mention, is not the 10% that OP is talking about.
Hi Arbee - perhaps you saw my note to another commenter earlier. We have made a correction to the article and updated it with additional information as well. Thank you for writing.
Correction: This story has been updated to correct an error we made in calculating an increase in monthly mortgage payments resulting form higher homeowners insurance premiums. We also added additional information from a study that the Minneapolis Fed wrote about last year.
This is just my opinion, but I think that to make the financial point of the article, that increased payments put some homeowners at risk of default, it should focus on the specific areas of the country where insurance rate increases have hit hardest.
I live in VA and while it's unpleasant that insurance rates have increased so rapidly, we are pretty much in the category mentioned in the article; our rates have increased by hundreds of dollars resulting in a marginal increase in our mortgage payments.
However, I have family members in south FL who are now paying close to $6,000 per year in rates compared to $2,200 just 5 or 6 years ago resulting in large increases in their payment. And of course there is CA and other areas of the country at risk from hurricanes, floods, and fire.
I like that the article focuses on the financial aspects rather than demonizing the insurance companies. You can't expect them to continue covering homes from fire and flood that are rebuilt in the same areas without mitigation. Also, the inflation of the past few years have increased the costs to rebuild.
Unfortunately since we all need insurance, all of us have to shoulder some of that burden.
Yes; I live in New Mexico (in the top ten according to the chart); I'd bet that increase was driven by the fires in Santa Fe/Los Alamos a few years ago. More expensive houses in or near fire-prone forests is going to drive up premiums.
Mine just went from $1700-1900 due to insurance hike. That’s almost 12%.
Did your home go up in value?
The valuation has, but it’s not like I could actually sell it for that much. I am paying higher property taxes and insurance on a fantasy number.
If a homeowner's increased insurance costs forces them into foreclosure then I submit they were WAY over leveraged to begin with and shouldn't have been in the home in the first place.
Thanks! I'd just about completed a comment to the same effect when I saw your "most liked" comment just beneath what I was writing.
This was a glaring mistake and had me questioning whether the author understands what he is writing. Now to go back, read the rest and see!
Almost word for word what I was just preparing to comment.
Your math is wrong. If insurance goes up 10%, how does my payment go up 300 a month unless my insurance is 36,000 a year. Your also mixing up mortgage insurance with property insurance. I’d take this article down and a financial professional review it before reposting.
You are absolutely right. I apologize for the error. We have updated the story and noted the correction. Thank you for writing - and thanks to others as well.
"Property insurance"? What's that? Homeowners vs. mortgage? Mortgage insurance is a non factor when you've paid 20% of the equity. Usually goes away after about 3 or 4 years of making payments. Homeowners (fire/flood/earthquake/major system) insurance is nearing impossible to even get in many cases in states like Florida or California. Care to research the actual prices of that?
Not saying they'll even pay out half the time, but if you need it, it's not cheap and getting worse...for a reason. I seriously doubt you even live in the US, or if you do you're a trust fund brat with a financial affairs manager.
You don't know what the hell you are talking about. PMI doesn't go away in 3-4 years if you put down 20% equity. If you put down 20% equity, you didn't have PMI in the first place. I'm sure there are localities where homeowner's insurance is difficult to obtain at a reasonable rate due to changes in insurance loss rates, state insurance commission policy changes etc., but nationwide homeowner's insurance rates are mostly up due to inflation in (re)building costs.
Nobody said anything about "putting down" any percentage you idiot. I said once you've got roughly 20% of the equity paid off the mortgage insurance comes off the payment, or is no longer required. Now, if in your state or whatever jurisdiction you're in you can pay a certain percentage amount down (up to and including the whole cash price, duh) - which would not surprise me - then perhaps you can obviate the need for mortgage insurance altogether.
No mortgage insurance is not the same thing as property insurance which covers damage and replacement costs. In Texas the cost of insurance on a $580,000. property is $3,500. which is about $291. a month if you add 10% you'll be paying $320. It is very likely that when you add property taxes that the amount you pay into escrow is higher than the amount you pay towards your loan and that is significant no matter what the trolls say. If you want to avoid PMI you can take out a second smaller loan which can be paid back in a more timely fashion but PMI has nothing to do with property insurance that you have to maintain even when you pay cash for the property.
"No mortgage insurance is not the same thing as property insurance".
THANK YOU. There is a lot of confusion in the comments. PMI is imposed by mortgagees. They make you get insurance for the mortgage and the policy is written in favor of the mortgagee - the lender. Homeowners insurance includes not merely the building(s) itself, but also liability to folks on the property. And you can decide how much to cover, deductibles,, etc. Two different things!
Being an asshole is compounded when you make ignorant comments. Please stop embarrassing yourself.
he is new here. maybe mom didn't send his breakfast down to the basement yet!
36,000 x .1 = 3,600 / 12 = 300
It’s crazy the amount of house you’d get for insurance like that!
Exactly- lender provided homeowners insurance is not 10x the cost of me buying insurance, he is talking about mortgage insurance
Folks my homeowners insurance jump 57% the past renewal yet it’s only 60 more per month. I live in the failed state of Illinois where the RE Taxes are now more than the mortgage payment is itself. The insurance companies are all suffering from the broken market in California where they have been prevented from pricing for the actual risk they are taking on. These are national insurance companies and we in the other 49 states are picking up the slack and after those fires in California it’s only going to get worse. Want to lower your insurance fire the Democrats
Home insurance plus property taxes being higher than the actual mortgage payment is true for us as well. It’s bullshit.
Here is a presentation from CA Consumer Watchdog about the reality of homeowners' insurance in CA:
https://consumerwatchdog.org/wp-content/uploads/2024/06/HO-Insurance-Presentation-May-2024-v21.pdf
The costs of wildfires for insurance companies are overstated, because 1) they conveniently forget about indemnification from utility companies; and 2) their exposure is mostly through CalFAIR plan. Which is an insurance pool with an average premium of $600/month for an average CA home. Multiply that by 2-3 for more expensive zip codes.
CalFAIR plan now has almost half a million policies - after insurance companies have been canceling them by tens of thousands. In my area (high wildfire risk) the number of CalFAIR policies went up 5-fold over the last 4 years. And the premiums in this plan are going up yet again - this year, somewhere about 20%. Because it is this plan - not insurance companies - that will go broke unless policyholders pony up the money to cover the losses.
But under the guise of "wildfire losses", insurance companies were allowed to shamelessly rip off customers in low risk areas. Premiums are going up by 10-15% all throughout CA. Sometimes a lot more than 15% - for instance, my friend's HOA insurance (middle of downtown, zero wildfire risk) has just tripled. Why? Because otherwise insurance companies threaten to pull out of CA!
So all that tripe about "other states picking up the slack" - is just that, the tripe spouted by insurance companies and their puppet - CA Insurance Commissioner Ricardo Lara. The most corrupt of corrupt CA Democrats.
You beat me to this comment. I’m also in Illinois, hoping to escape in the next year or two. Property taxes are out of control, and tent cities are popping up in all of the parks. Total government failure.
My husband and I for the first time in our 50ty years of marriage had an argument regarding bundled home and car insurance rates. Our house is paid for and we are at the end of our days. Property taxes doubled this year (yikes!) and Social Security, based on our average salary over the years of $50,000, has not gone up. If he dies, I decided I would not insure the house, so i can afford to live in it with his SS. He, protector that he is, opted to pay the insurance. I lost. I think we are just paying for other disasters, though after the fires in HI, the NC tornado route and CA fire, I see that there were no insurance guarantees, nor fema assistance in most cases. So if my dear husband dies before me, I’ll probably keep the auto liability (to cover those without insurance) on my paid cars, but scrap the home insurance and figure the land will still be salable for my children. Luckily I raised them self reliant, responsible, and resilient. The insurances connected to health care, house/property holdings, and car coverage are in themselves a “liabilities” to me.
Choose homeowners coverage with a high deductible - $5k or $10k or whatever your insurer will allow, and don’t make any claims unless disaster strikes
And have the deductible covered set aside
This works if your house is paid off or if your mortgage company allows it, but many will not.
Yes - if you have a mortgage, always check to see what the maximum deductible they allow is. $5000 deductible is pretty common now and was no issue with my servicer
These are the exact reasons why the national government is cutting all spending and raising revenues via tariffs. Guys who work in the macro capital markets like Druckenmiller and Tudor Jones and the current Secretary of Treasury have been knowing this and saying this for a long time.
Not sure of the connection. Please add more. Thanks.
Hi silverwind see above
What does this has to do with tariffs ? Just stop.
Did you not read the OP comment with comprehension?
Their social security is stagnant . Their taxes and insurance are increasing because of inflation (and if an increasing number of reports be true, TdA acts of arson). In short, they can’t afford to live.
These are precisely the reasons why the current administration has to slash spending massively and increase revenues without raising taxes. And as they have repeatedly explained, these are the reasons why they are taking those steps.
It’s not that difficult to understand how those steps directly help people exactly like OP.
I whole hardily endorse all the Doge cuts and tariffs. The administrative choices made in the last 40ty or more years, if continued, would have lead to a dead end street. I was yelling 20ty years ago when industry was leaving America. Why is three houses, a boat, plane, and 3 cars with first class vacations more important then building in America and enriching our countrymen here.? The money and power greed is way beyond me. As Batya Sargon put it: “…with manufacturing (by the middle class) comes creativity.” The ground/floor workers know inefficiency and efficiency as well as craftsmanship and practicality. And that is what made in America used to mean. The elites running to the cheap factories elsewhere forgot this big plus. Getting back to the Trump and Elon ceo/tech/business agenda, I’ll gladly live on P&J sandwiches in order to save social security, have affordable homes &health care with good solid jobs.
Yes indeed.
People are looking at the stock market but they’re not THINKING about the stock market. Check it out it’s obvious.
* Tariffs to some degree will reduce consumption - bad for stocks
* If people reduce consumption, they will use excess money to reduce credit card debt and loans - bad for stocks
* if the government ends tax on social security, think what that means for OP. THATS $400 or $500 A MONTH - a big deal
* If we end income tax <$150,000 consumption will go straight to the moon and then take off for other planets.
Good for stocks.
Do I comprehend? Haha. No because you are full of shit and just listen to whatever this administration feeds to you. I was trying to be nice but you are being a pompous prick about it. Social security is funded by employers and employees being taxed. Not the revenue from tariffs. Taxes aren’t just some blanket thing that goes everywhere. Of course you would blame immigrants. Sure, they use someone else social security number to work, but guess what…they put into the social security fund and never get the benefit when they retire. So they are actually funding our retirement more than your precious tariffs. Do you comprehend? I swing a hammer for a living and I do. All your arguments-Tariffs , immigrants, etc have nothing to do with this article.
Just stop.
So your answer is “no I don’t comprehend.”
Now you can say “thank you for explaining this to me so fully.”
Han, will the government eventually still be taking money for SS out of pay checks or will the money from tariffs fund this if they, indeed, cancel some or all taxation? Maybe people can be responsible for their own retirement. I think Bush floated this by at one time. Not too sure about trusting people on this. A lot of people focus on instant gratification and that’s why credit card debt is bad.
That’s not how I understand the plan. They are saying … no income tax withdrawn from social security income.
Still not making the tariff connection clear enough. What does government revenue or lack there of have to do with the insurance companies? Also, you realize that social security is its own trust right ? It doesn’t have anything to do with that national debt. Also, how are tariffs going to raise revenue in things are to expensive to buy? Is these tariffs were to work , they most likely won’t, we won’t feel the positive effects for years. Maybe even decades. How is that supposed to solve the social security payout problem that is supposed to happen in the 2030s?
The major factors for skyrocketing insurance are multiple catastrophes, and inflation. Inflation to the consumer is one thing, but for insurance it is lethal. We saw these same kinds of things in the 1970s.
Social Security is its own trust sure, and it is a trust that is funded by taxation. Aside from (and in addition to) the gigantic immigrant fraud that is being found , where they are receiving medicare simply because they have an ssn, the SS administration is running out of money. WE CANT RAISE TAXES ON OP AND TENS OF MILLION OF PEOPLE JUST LIKE OP WHEN THEYRE ALREADY AT THE EDGE FINANCIALLY.
That is why they are raising revenues massively with tariffs. And you are wrong about the delay. Every purchase of foreign products under tariff sends a payment to the treasury, and makes social security that much more solvent.
The administration talked about this on the campaign, they talked about it the first week in office, they’ve been talking about it ever since. Do you not comprehend or do you just not listen at all?
To be fair, hurricanes and wildfires are causing more damage simply because there are far more homes being built in harms way. If you buy a home close to the ocean, you should be required to self-insure. If you buy a home in a historic fire corridor... well that makes you an idiot. Insurance companies are for-profit businesses. They should never be required to accept risk by governmental agencies because that endangers the entire system.
100% agree.
Insurance SHOULD be based on the cost of replacing the asset multiplied by a factor associated with the risk of damage (small or large damage). Real estate prices have gone up considerably. The cost per sqft to build has also risen quite a bit. If housing prices double, for some strange reason, the cost to build them seems to double too. I am not sure I buy that, but that is what the market is doing (are all those construction guys now getting paid double - the ones from Guatemala???).
When I lived in CA, it was apparent to me that all those cliff side homes were built because of the view, but also because that was the only land available. This is because before there was such an insurance market, nobody was dumb enough to spend a lot of money on unstable land and then lose it in the next El Nino. Same with beach houses. Nobody who wasn't named Vanderbuilt would put a mansion on the coast. And their mansions were built to far different standards than our current beach front mansions. I grew up in Miami. As a kid, I noticed all the houses were the same low slung roofs and cinderblock walls. Only someone named Flagler or some very rich person would build a huge house. And there weren't many of them (they are all museums now).
It seems to me as a bit of a math nerd, that people in FL and those people in CA were not paying for the risk associated with their properties. Instead, THEIR risk was spread out across the country. THIS allowed them to afford to build expensive houses in risky areas. It is time that we return to risk factors associated with the house. Where it is, what it costs to build it there, and what the risk is in that street address. I am thinking of moving to FL and am looking at lots in an area that is in the path of hurricanes. I notice (and noticed in Miami) that there is some high ground. And by high, maybe 10 or 15' higher than the rest. All this is in flood plain maps. The insuring of a house is a distinct thing. Each houses's risk is very well understood. It is time that the risk of each and every distinct house be reflected in the cost of its insurance. We have computers these days, it is a simple calculation.
This is exactly right. Make people bear the cost and risk of building their home. Also it allows climate fear porn, because now every hurricane sets a new record for "most destructive" and it's not due to strength of hurricane but the millions of homes we're building in it's path.
Here here.
Such a system might encourage people to buy homes built properly to protect them from natural disasters. Are you building in a fire-prone area? Then build with concrete or hempcrete walls and use unvented metal roofs. (In reality it is more complex than just changing building materials, but we do have booklets on this now--I am just saying, there are ways it can be done).
But as it is you could do everything perfectly (and pay a bit more to do so) and the insurance company might throw you a 5% discount. And building the home right probably increased the construction cost by at least that much, meaning you wind up paying about the same (or more) for insurance anyhow.
Sure you could try recouping the cost by going without wildfire insurance--but only if you own the home outright. And once you sell, any buyer using a bank loan will still be forced to pay for the nearly-useless and absurdly expensive wildfire policy too.
If insurers really are spreading the pain of stupid, local building decisions around nationally then that is a story worth pursuing. I, for one, don't want to subsidize property built in a flood plane, or built (without proper protections) in a fire risk area. I know things are changing, and places that were acceptably risky 10-20 years ago are not at risk of being uninsurable. So it would be good, I think, for insurance premiums to be determined solely by individual risk, and then where private insurance becomes too expensive the government can provide subsidized property insurance--but only until the home is destroyed, and only for the current replacement value (no expansions to homes getting subsidized insurance). Once disaster hits though, there should be a buyout offer and then no more subsidized insurance on that property.
If you want to discuss the REAL category 5 housing crisis, it's that people are being priced out of both owning and renting.
Part of that is because of zoning restrictions which have limited the building of new housing for ages.
Part of that is because prior to the Covid-19 pandemic, the professional-managerial class was stuck living in the cities where they worked and during it, they were all remote-working and moving to areas where housing had been cheap. Supply and demand. They moved, created new demand, and new higher prices moved with them.
Part of that is that housing has been bought up by big companies that jack up rents.
Part of that is because materials costs rose during/after Covid and haven't come down appreciably. Almost none of it is the cost of labor because those who are profiting aren't trickling those profits down to the people they hire. They might pay an additional 5%-7% but they're making a hell of a lot more.
Insurance? Yeah, that's an issue, because it rises with the resale value of your home. And with all the above (and more) happening, virtually all homeowners have seen valuations rise on paper. And the higher valuation requires insurance that covers the full value.
In my area, housing has gone up about 90 to 100% in the 10 years I've lived here. I'm sure it's similar in other places. Florida, where I used to live, is about the same.
Has everyone's income gone up 90 to 100%? No? There's your Cat 5.
Floridas prices are dropping dramatically, especially Miami Beach. I’ve read some older condo buildings special assessments are up $200,000 -$300,000k per unit (new rebar major structural repairs).
When the foreign owners or anonymous LLCs disappear and abandon the assessments, that’s an additional 12 magnitude earthquake thrown on top of the storm.
«If you want to discuss the REAL category 5 housing crisis, it's that people are being priced out of both owning and renting.»
That is a *boom* not a *crisis*, for those who matter. In every situation ask "for whom?"...
«Part of that is because of zoning restrictions which have limited the building of new housing for ages.»
That is just a symptom. The real reason is that the remaining "good jobs" are concentrated in a few areas and to get within commuting distance of a "good jobs" area one must pay. Property prices and rents have been falling, sometimes from decades, in those areas where the "good jobs" have been offshored.
«In my area, housing has gone up about 90 to 100% in the 10 years I've lived here. I'm sure it's similar in other places. Florida, where I used to live, is about the same. Has everyone's income gone up 90 to 100%? No?»
"Everyone" is a pointless generalization. There are those who matter and those who do not matter and those who matter have had booming incomes since Reagan. Here is a cartoon from "The Economist" depicting some of those who matter:
https://blissex.wordpress.com/wp-content/uploads/2024/07/polihousingoldpeoplebigmoney.jpg
That cartoon should show the Royal Crown Trusts ownership of 1/3 of open land mass in Britain.
Perish the thought of William and family running through fields with public housing projects on the distant hills.
Sorry, Matt, but your author here lost any value in this article - and credibility with regard to any other points he would try to make - with his first, glaringly obvious error in his example regarding insurance increases potentially resulting in a 10% jump in total payment. His example indicated to me he has limited understanding of a mortgage loan and components of monthly payments. Caused me to stop reading right there. I am not going to spend time digesting and analyzing any of his other points when such a basic example is so obviously incorrect. Calls into question anything else he may have presented in the article. It’s a shame as this insurance situation could become extremely severe and impactful.
Matt take a close look at your math on the insurance rate affecting a monthly payment where escrow is included in the total. It’s still a major problem, of course, but the example is over stated.
A quick check of the byline would have informed you that the author is Eric Salzman, not Matt Taibbi.
Didn’t seem like some article from Matt
Glad you point that out
Matt's style is very distinct, isn't it? Been a fan longer than this blog has existed, and a subscriber for years.
I'm an insurance agent. If you get a 10% increase at your home renewal you're very lucky. I know this isn't the point of the article, but car insurance premium increases are higher than that, especially if your a risky category. It's a vicious cycle. Your premium subsidizes the people who drive uninsured. As inflation soars more people decide to take the risk of driving un insured. The remaining insurance holders premium increase, the cycle continues. I see 20 year old boys with just normal kid stuff like a small accident and a speeding ticket on their record paying $6-7000/year if they're not on their parents insurance. And "affordable" cars like kias and hyundais have the worst claims probability so they can't even save money there. It's a mess. Yet another pressure forcing young boys to give up and drop out. How can you afford to drive to work paying a $1000 /month in car payment and insurance at minimum wage?
The spiraling cost of living, in every single category, is a mess.
«Yet another pressure forcing young boys to give up and drop out. How can you afford to drive to work paying a $1000 /month in car payment and insurance at minimum wage?»
The culture in the USA is "winners take all" and "devil take the hindmost" and people like that are considered "losers": why don't they get a well paid job at Halliburton, General Dynamics, or Goldman Sachs? Anybody call apply! :-)
This is a story where the averages may not be as revealing as the details. For instance, I live in New Mexico which is in the top ten on the chart, yet my home insurance has not gone up. This leads me to wonder if this is largely being driven by homes in the Santa Fe/Los Alamos area (areas full of very expensive homes bordering on national forests or other public lands) that were affected by the catastrophic wild fires a few years ago. So it's similar to California in that regard.
Not that this invalidates your conclusions; it just bears more detailed analysis. For instance, the Albuquerque housing market is still very hot. Is a similar thing happening with insurance rates there? Or is it just the expensive homes in the Rio Grande Bosque (which is an area that burns frequently)? It would be interesting to know...
Then pay closest attention to the non-recourse states. That’s where a collapse will appear first as owners just walk away.
To know how likely that is find the amount of second mortgages in place in those states.
See if that’s near the 2008 level.
Part of the problem facing homeowners in areas with lower loss ratios is that a portion of their premium goes to cover underwriting losses in higher risk areas. While this is part of the traditional model for insurance, it has been skewed by state insurance commissioners forcing companies to take on risk at lower-than-appropriate rates by limiting rate increases or withholding license to write policies in lower-risk areas unless they take on policies in higher-risk areas and at rates they limit to levels that do not reflect that risk. The recent catastrophes at bookend locales of the country are prime example. North Carolina losses were from a near-impossible-to-predict natural occurrence and would not have been a large impact on premiums pre-storm. Those excess losses are properly spread among the policyholder base. The Pacific fires were much more predictable, in fact many companies had sought to reduce their exposures and increase rates to prepare for those losses. I am not defending any of the companies, however it is also my understanding that the CA insurance commissioner provided something of an ultimatum: Either write the policies and price them at rates he considered acceptable, or leave CA. Those are forced risks; the CA commissioner essentially forced policyholders outside of CA to pay for those risks. Those costs should not be borne across the policyholder base.
«The Pacific fires were much more predictable, in fact many companies had sought to reduce their exposures and increase rates to prepare for those losses. [... ] Either write the policies and price them at rates he considered acceptable, or leave CA. Those are forced risks; the CA commissioner essentially forced policyholders outside of CA to pay for those risks.»
It is was a very simple choice: CA voters are obsessed with property profits and vote on property valuations even more than elsewhere and the CA commissioner protected the profits of affluent CA property speculators and their votes for the governing party at the expense of voters outside CA: a win-win! :-)
More broadly speaking I have recently thought that the real divide in the USA is between those for whom "Proposition 13" makes a lot of money (and so they support offshoring, immigration, financialization, ...) and the others, and the others are in large part Trump's base.
Homeowners insurance has gotten ridiculously expensive....so much so that our insurer sends out "warning" letters several months before it's due...We've had at least a $300 increase each year forat least the last few yrs...and one year it jumped by over $500... and the other kicker is ...this is for less coverage & higher deductibles....& this is in the upper midwest...
Same here in Kansas. And an even bigger issue is insurers are cancelling policies in entire older neighborhoods because they're in financial trouble. The excuse they use is "too many trees." Then the homeowners are left scrambling for coverage at any price.
That's terrible!!
This is a very real issue where I live, near the Texas coast. Our nice but not lavish 2800 sf home, miles from the water, is valued around $500,000 and our property taxes -- even after the legislature moving to cap increases and including our homestead exemption -- cost us $9000 a year and our insurance went up to $5300. That's $1200 a month going into escrow for a very ordinary home. Our payment went up $400 recently to cover increases in both. We can absorb it but many can't. Then what?
We were under contract on a house closer to the ocean last year and our insurer wouldn't even write a policy for it, so we had to talk to an independent broker, and they cobbled together coverage that was prohibitively expensive so for that and other reasons we withdrew our offer. The house never did sell. There are thousands of homes in that area of the city - what happens when they become literally or practically uninsurable? There are only so many cash buyers who also are willing and able to self-insure.
My fear is that the only entities able to absorb these costs will be giant real estate conglomerates who will become my children's landlords because personal ownership of homes will evaporate.
My service provider just tried to put me into FPI over what they called a 4 day lapse in insurance.
Only there was no lapse.
3 emails, 4 phone calls later with complete documentation resulted in the "Oops, nevermind." response.
I have no doubt the financial guys in MBS or in insurance plays are testing the water on using FPI to squeeze more money out of a stagnant market.