NEW ORLEANS (WVUE) – Higher property insurance rates, more expensive flood protection premiums and rising interest rates: a trio of factors affecting not only personal budgets but also the real estate industry.
On Thursday (October 13), hundreds of real estate agents and members of the banking community attended an economic and real estate forecasting symposium in Jefferson Parish. The theme of the symposium was “Recognizing risk in an uncertain world”.
“We’re going to see a contraction, we’re already there. We’ve now seen seven months of consistently reduced existing home sales,” said a speaker at the event.
After Hurricane Ida, Louisiana finds itself in an insurance crisis. Some insurance companies have failed financially and some others have withdrawn from the state.
Michael Mito of JPAR Gulf South served as co-chair of the forecast symposium.
He agrees that real estate agents are seeing the impact of the insurance crisis.
“I would think for us here that the insurance issue affects us even more than inflation,” Mito said.
The cost of insurance could discourage some people’s willingness to become short-term homeowners.
“I would definitely say that, I mean, you know, the downside to that is how could it possibly not be when there’s so much uncertainty and all these things?” Mito said. “The great thing about insurance is, right, that’s an annual cost that comes in, and if we look at those rates now, the expectation that it’s ever going to go down is probably never going to go down.”
Not only residential properties are affected by higher insurance premiums.
Russell Bernstein is a commercial real estate agent and business broker at KW Commercial.
“I think commercial property buyers will start leasing because it’s too difficult for them to get financing too; Either it’s taking too long, interest rates are too high, and insurance is really high,” Bernstein said.
The hefty premium increase recently approved for Louisiana’s insurer of last resort, Louisiana Citizens Property Insurance Corp., is impacting not only homeowners but businesses as well.
Jim Donelon is the Louisiana Insurance Commissioner. Donelon approved the rate hike for Citizens.
“63 percent for residents, 73 percent for the 6,000 commercial policies are unavoidable. It is required by law that the market of last resort — citizens — adjust rates each year to keep them above the private sector’s highest, lest it become a government insurer of hurricanes,” Donelon said.
Mito was asked how the real estate market will survive given the current circumstances.
“You know, there will always be land, there will always be transactions,” Mito said. “I think we will definitely be a bit slower than before.”
Still, some areas of the real estate market are expected to do better than others.
“I think some of the strongest sectors will be multi-family housing and then the rental market; People will continue to need housing,” Mito said.
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