Around the Industry: Climate Change, Rising Replacement Costs, and the Latest in Florida and California (April 2025)
Reading time • 3 mins
By Matic
Homebuyers have faced a number of challenges in navigating the real estate market over the last five years. The start of 2025 doesn’t seem to indicate a major reversal of this trend, but there is at least some stabilization occurring with home prices and mortgage rates. Other factors like rising homeowners insurance rates and natural disasters (particularly California’s wildfires and hurricanes in the southeast) continue to have a major impact on mortgage affordability.
Understanding the current environment in homeowners insurance can help you guide borrowers with realistic expectations on how to land an affordable policy.
High Climate-Peril Areas Pay Significantly More for Premiums
It’s no secret that home insurance premiums are on the rise and the numbers are confirmed by a recently published report from the U.S. Department of the Treasury. Even with general inflation skyrocketing in 2021 and beyond, the average premium for a homeowners insurance policy increased 8.7% faster than overall inflation from 2018 to 2022.
But that gap becomes even more dramatic when looking at zip code-specific data. Homeowners living in the top 20% of zip codes with the highest expected losses due to climate perils paid 82% more than the bottom 20%. Location matters when it comes to the true impact of insurance premiums on homebuyer DTI.
Read the full Treasury report.
Rising Replacement Costs Challenge Buyers and Homeowners
Premium prices are largely set by the estimated replacement cost for the insured property. But many economic factors have increased raw material prices in recent years, causing a 55% increase in replacement costs between 2020 and 2022. With global tariffs setting an uncertain tone for 2025, it’s important for homeowners to accurately calculate the right amount of coverage for their home with the help of an insurance agent. An annual policy review can also help reassess coverage needs and account for changes in a property’s replacement cost.
See how Matic is helping lenders, servicers, and banks offer customer value and generate revenue.
Learn MoreUninsured Homes Highest in New Mexico and West Virginia
New research from LendingTree revealed that one in seven homes in the U.S. are completely uninsured. The states with the highest uninsured rates were New Mexico (23.3%), West Virginia (23%), and Mississippi (22.9%).
When looking at metro areas, the highest uninsured areas were McAllen, Texas (43.3%) El Paso, Texas (23%), and Miami, Florida (21%).
California, Florida, and Louisiana: Updates on Challenging Coverage Areas in the U.S.
- Long-term climate risks shifting in California: While wildfires remain the biggest climate risk in California today, experts predict that the largest natural disasters to watch for in the next 25 years are mudslides and flooding. This is expected to impact 16% of urban and suburban development across the state.
- Florida regulators expand providers in state insurance market: After Citizens, the state’s insurer of last resort, grew significantly in recent years, Florida recently approved three new insurers to operate within the state.
- The sought-after home feature lowering Louisiana insurance rates: Fortified roofs are the new must-have in Louisiana. 25.2% of homeowners who participated in the Louisiana Fortify Homes Program saw their home insurance premiums drop by at least $2,000 per year.
