Insurance Crisis Puts Louisiana Housing Market in Peril
The crisis impacts all aspects of the housing market—buying, owning, selling, and renting. Citizens, the state-backed insurer of last resort, has seen its rates climb by thousands of dollars annually, with nearly 27,000 customers in New Orleans paying an average of $5,445 a year.
NEW ORLEANS — Louisiana leads the nation in the percentage of mortgages that are deeply underwater, a situation exacerbated by an escalating insurance crisis that is driving up premiums, limiting coverage options, and adding financial strain to residents already facing rising costs.
The New Orleans area is particularly affected, with signs of broader economic repercussions emerging. The gap between the median home price in New Orleans and the national average has nearly doubled since 2022, from $50,000 to almost $100,000, according to Zillow. The Federal Housing Finance Agency reports that New Orleans had the third-lowest rate of home appreciation among 246 metro areas over the past year, with values declining by nearly 3%.
High insurance premiums are a significant factor contributing to these issues. Driven by climate change and the region's hurricane risk, these costs are pushing homeownership out of reach for many. In 2020, a median-priced home in New Orleans cost about $1,400 per month with 20% down and average insurance premiums. Today, the same home costs $2,154 per month due to increased insurance and interest rates. A family with a $57,000 annual income could afford the 2020 home, but now they would need over $86,000, far above the metro area's median household income of $61,602.
The crisis impacts all aspects of the housing market—buying, owning, selling, and renting. Citizens, the state-backed insurer of last resort, has seen its rates climb by thousands of dollars annually, with nearly 27,000 customers in New Orleans paying an average of $5,445 a year. Affordable housing groups are struggling to find homes within their clients' budgets, as rising monthly costs force some homeowners to go without insurance.
The relationship between rising insurance costs and the housing market is complex. While insurance is not the sole factor, it significantly affects housing prices and demand, particularly in areas with high climate risk. Reports indicate that increasing premiums are putting downward pressure on home prices and reducing demand for at-risk properties.
State officials hope recent legislative changes will attract more insurance companies to the market, increasing competition and lowering costs. However, critics argue that these changes could push more people onto Citizens, resulting in higher premiums.
The cost of insurance, once a minor consideration, has become a critical factor in home buying decisions. Many sellers are replacing roofs proactively or as part of sales negotiations to offset the buyer's insurance costs.
As the insurance crisis continues to stress Louisiana's housing market, the need for solutions to make insurance more affordable and available becomes increasingly urgent.
