Rising insurance costs cut into buyer affordability

Housing affordability is taking center stage this fall for the Trump administration. From President Donald Trump’s early executive order ordering the heads of all executive departments and agencies “to deliver emergency price relief,” to Treasury Secretary Scott Bessent highlighting housing affordability as one of his “big projects,” the affordability crisis is clearly top of mind.

While much of the focus is on bolstering housing inventory and lowering interest rates, something else is significantly hampering affordability in many markets across the country. According to data from insurance shopping site Insurify, in 2025, the national average cost of homeowners insurance is projected to rise by 8%, reaching $3,520 annually by the end of the year. This comes after insurance costs rose 9% in 2024 and 20% between 2021 and 2023. 

For existing homeowners, and those looking to become homeowners, this means that as of September 2024, 32% of the average single-family mortgage payment went to property taxes and insurance, according to data from the Intercontinental Exchange. This is the highest rate recorded since Intercontinental Exchange began tracking this data in 2014.

In Louisiana, as of mid-August 2025, on average 18.2% of a homeowner’s monthly mortgage payment was going to insurance alone, according to data from Realtor.com. Florida (17.0%), Oklahoma (14.7%), Mississippi (11.2%), Alabama (11.1%), Texas (10.3%) and Nebraska (10.0%) rounded out the top seven. 

Researchers at New York University, Rice University and the Federal Reserve Bank of Dallas believe these rate increases are responsible for an additional 149,000 mortgages becoming delinquent between mid-2022 and mid-2023 that would otherwise have remained stable. 

Replacement costs skyrocketed

According to the Insurance Information Institute (III) there are a variety of factors that contribute to the rising insurance premium costs.

“A big driver of insurance premiums is replacement costs,” Mark Friedlander, the director of corporate communications at III, says. “We did a study that looked at cumulative replacement costs over a four-year period. If we look at 2019 through 2022, we saw a 55% cumulative replacement cost increase — that is nearly four times the Consumer Price Index increase during that same period.” 

Friedlander attributes much of this increase to the supply chain disruption and labor shortages caused by the pandemic. Data from the III shows that replacement costs have moderated over the past few years, and the organization is projecting a low, single-digit increase in replacement costs. 

Natural disasters and population shifts play a part

Another driver of rising insurance premium costs, according to the III, is the population shifts occurring nationwide.

“More people are living in harm’s way than ever before,” Friedlander says. “We’re seeing the largest growth in coastal areas particularly — Texas, Florida, some Southeast states — more people are moving to areas that are prone to landfalling hurricanes. When you put more people in harm’s way, as the cost to rebuild increases, that is going to raise your costs as well.” 

In 2023, there were 28 weather disasters that cost $1 billion or more. While large weather events like hurricanes and wildfires often steal the spotlight, insurance experts note that some of the costliest disasters include large thunderstorms and convective storms, which can occur anywhere in the country. 

Data from the III shows that $60 billion in damage was caused by severe convective storm losses in 2023, higher than all the combined hurricane damage from that year.

“We are seeing an increase in the number and severity of convective storms,” Lauren Menuey, the managing director of Goosehead Insurance Agency, says. “Those storms have really high winds, severe thunder and lightning and really big hail, and the hail is getting larger. What may have been a storm with just pea-sized hail a few years ago is now a storm with baseball-sized hail, and the losses are much greater.”

There is some good news

Although insurance experts only anticipate insurance premiums to continue rising, there is some good news. 

“Earlier this week the 15th new insurer entered Florida. This is more than any other state,” says Friedlander. “We’ve seen legislative reforms passed in Florida, and the state has shown a great turnaround compared to the risk crisis the state was facing for so many years.”

Friedlander says Florida recorded the lowest average premium increase (1.7%) in the country in 2024 because of these changes. 

But Florida is not the only state experiencing some relief, Menuey says rates across the country are beginning to stabilize. 

“Carriers are getting to a point where they are starting to feel a bit more stable, but in order to get there, over the last 24 months, they’ve taken multiple rate increases, a lot of which were double-digit increases,” Menuey said. “While consumers may still see some increases as their policy renewal cycle catches up with the increases, depending on what carrier they are with, they could see those increases start to level off towards Q4 this year and into next year.” 

While this is good news, Sean Kent, the senior vice president of insurance at FirstService Financial/FS Insurance Brokers, has some concerns.

“It is great that rates are going down and that we are seeing increased interest from carriers in places that were underserved in the past, but you need to be aware of their AM best rating,” Kent says. “There are a lot of newer carriers that are looking to fill a void, and I think homeowners just need to be a bit more savvy and understand who the carrier is and how financially stable they are.”