Local+experts+say+insurance+crisis+affecting+home+sales – New Orleans CityBusiness

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CityBusiness staff reports//June 2, 2023
Local experts say insurance crisis affecting home sales

CityBusiness staff reports//June 2, 2023
Photo courtesy DepositPhotos
Delta Title Corporation president Carolyn Lalla Bailey has never seen an insurance market as bad as it is right now. And while Bailey said she has long expected to see prospective buyers unable to afford insurance on homes they are attempting to buy, she said even existing homeowners without a mortgage are no longer safe.
“I have been in this industry for 20 years, so I’ve withstood the slow times in the market,” Bailey said. “I’ve never seen anything like this, where insurance is a factor. I’ve seen where houses don’t appraise, I’ve seen the fees come in too high for the lender, I’ve seen a lot of things, but I’ve never seen it like now, where deals are falling apart because once they get quoted for the insurance, it knocks them out and they are not able to obtain a loan.”
Bailey said a Delta Title deal recently went through where the property’s sales price was $250,000 and the homeowners insurance premium was $12,000. While that deal was finalized, Bailey said that only happened after several rounds of negotiations.
Overall, sales are down across the board, she said.
“We’re seeing fewer deals, and usually we’re much busier at this time,” she said. “We’re still working transactions, and people are certainly still buying and selling, but certainly not at the volume that I would consider a normal real estate market.”
Bailey said she prepared herself for historically high interest rates to stall transactions, but buyers have learned to deal with those rates, she said. Instead, applicants attempting to qualify for home loans are being knocked out of contention when the insurance rates come back much higher than normal.
“They have to tell the prospective buyers, look, where we would normally qualify you for $300,000, $500,000 or whatever, we’re going to have to knock it down tremendously and you’re going to have to find a lesser priced house because you’re not going to be able to qualify once we kick in the insurance,” she said. “It’s a huge problem, I think there’s a lot that needs to be done, and I certainly don’t know what the solution is, but if something is not done soon, my concern is that it is going to affect people who currently own property.”
Insurance policies up for renewal have doubled in cost in some cases already, Bailey said, making it difficult for people who already own their homes to insure their property. Bailey said she is hearing from homeowners who have paid off their mortgage and from businesses that own multiple properties that they are choosing to self-insure.
“They’re thinking their best course is to put X amount of dollars aside, and should something happen, they will take care of it from those dollars,” she said. “Not everyone is in a position to do that.”
Robert Bergeron, managing attorney with Crescent Title, said combined with higher interest rates, the significant increase in insurance costs has caused a softening in the residential market.
“However, if history is an indicator, we will see insurance premiums begin to moderate as more competition comes into the market,” Bergeron said. “After Katrina, we saw many insurance companies pull out of the market. This created a supply and demand issue which drove rates up. As we moved past Katrina, new companies began to enter the market which caused premiums to slowly decrease.”
Many purchasers are holding their nose and paying the higher premium, but being prepared to shop every few months to look for cost savings.
“Also, an increase in deductibles can make the premium more palatable, but smart buyers will keep some money on the sideline to cover the higher deductible in the event of a hurricane,” Bergeron said.
Bailey said she is hopeful that a quiet hurricane season will help steady the market and allow insurance rates to go down. But, she said she is getting more and more nervous since she has seen no signs of market correction so far.
“I try to maintain a positive outlook and look for a silver lining,” she said. “I know there’s the incentive program that the Department of Insurance put out there, but no one really has come forward to say they want to write. The companies that did apply, from what I know, they already exist in Louisiana. They just stopped writing. What other things could we be doing to attract other agencies into the state of Louisiana?”
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