The ongoing insurance crisis in Florida, fueled by the exodus of major insurers and the increased risk of extreme weather events, could trigger a downturn in the state’s real estate market, experts told Newsweek.
Homeowners in the Sunshine State currently pay the highest insurance premiums in the country. Floridians pay private insurers an average premium of about $6,000 a year, according to the latest data from the Insurance Information Institute, or Triple I, according to Barron’s and CNN Business, compared to the national average of $1,700.
Few people can self-ensure against the loss of their homes, and banks require an insurance policy to protect their collateral and provide a mortgage for a house.
The increasingly unaffordable cost of home insurance risks leaving residents uncovered, and thus unable to get a mortgage should they want to buy a new home, which could escalate to a statewide decline in the real estate sector.
“If you don’t have an insurance policy, it’s basically impossible to take out a mortgage,” Benjamin Keys, an economist and a professor of real estate and finance at the University of Pennsylvania’s Wharton School, told Newsweek.
“And given the important role that financing plays in the housing market, without a functioning insurance market you don’t have a functioning mortgage market, you don’t have a functioning housing market.”