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An Auction.com survey indicates that rising insurance costs and property taxes are the primary drivers of increasing mortgage delinquencies in 2024. MFI-Miami reports that 37% of default servicing leaders surveyed identified these hidden costs as the top reason for delinquencies, surpassing other factors. Homeowner insurance rates have notably increased by 19% since 2019, contributing significantly to this trend.
HOUSING CRISIS ALERT: Rising Insurance Costs And Property Taxes Are Triggering Mortgage Delinquencies
HOUSING CRISIS ALERT! An Auction.com survey found the rising costs of insurance costs and property taxes are contributed to rise in delinquencies. This is not good news. It could create a housing crisis bigger than 2008.
What poses the greatest threat to rising mortgage delinquencies in 2024?
Auction.com recently conducted a survey of default servicing leaders. They found that the primary concerns that rising delinquencies are increasing due to rising insurance and property taxes. 37% of respondents points to these hidden costs as being the #1 reason for delinquencies. This beat out any other factor.
Homeowner insurances rates have increased 19% since 2019.
What factors are contributing to rising insurance rates and broader mortgage delinquencies?
Rising insurance rates are primarily attributed to changes in climate, as reported by Guaranteed Rate last year. These escalating rates, along with increasing property taxes, are causing delinquencies not only in mortgages but also in other areas such as consumer debt (32%), unemployment (15%), commercial mortgage defaults (10%), and falling home prices (6%). To mitigate these risks, homeowners are advised to compare insurance rates, increase deductibles, bundle home & auto, ensure proper coverage limits, assess roof condition, reduce risk through smart technology, consider private flood insurance, proactively protect property, monitor credit rating, and estimate insurance costs prior to purchasing a new home. This data comes from an April survey of default servicing leaders, including banks, nonbanks, mortgage asset owners, and government-sponsored enterprises, highlighting an early warning of potential future defaults due to climate change impacts and rising insurance costs.
- Compare insurance rates
- Increase deductibles
- Bundle Home & Auto
- Ensure proper coverage limits
- Assess roof condition
- Reduce risk through smart technology
- Consider purchasing private flood insurance
- Proactively protect property
- Monitor credit rating
- Estimate insurance costs prior to purchasing a new home
Rising insurance and property tax rates are are also causing delinquencies in other areas. Rising consumer debt delinquencies are not that far behind with 32%. This is followed by rising unemployment at 15%. Commercial mortgage defaults are also contributing to delinquencies at 10% with falling home prices at 6%. The survey was conducted in April. Respondents included banks and nonbanks. In addition to mortgage asset owners and government-sponsored enterprises.
The survey comes as insurance costs for homeowners continue to rise. The escalating impacts of climate change on America’s housing market has government and industry raising alarm bells.
These findings serve as an early warning of what could trigger more defaults in the future. Especially, if we continue to see more natural disaster events that put more upward pressure on home insurance rates.
