Homeowners insurance is a stealth inflation driver
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Illustration: Shoshana Gordon/Axios
While the rising cost of auto insurance is pushing up the official inflation rate, there's a stealth insurance cost that isn't showing up in the Consumer Price Index: homeowners insurance.
Why it matters: Along with high mortgage rates and record home prices, soaring insurance rates are just one more thing putting pressure on the cost of homeownership.
State of play: Insurance costs are up around 20% over the past two years and are projected to rise another 6% in 2024, according to an estimate from Insurify, a comparison site.
- Pull back further, and the numbers are even more astonishing. The cost of insuring the average home rose to $1,905 in 2023 from $1,272 in 2019 — a 50% increase — according to data cited in a recent note from Bloomberg Intelligence.
The big picture: This cost isn't showing up in the official inflation data.
- The CPI instead measures Tenants and Household Insurance, which only looks at renters insurance. That didn't rise as fast over the past few years.
- If CPI took homeowners insurance into account, it would have pushed the measure up about 0.7 percentage points to 4.11% in 2023, according to an estimate from Andrew John Stevenson at Bloomberg Intelligence.
- It's a significant enough impact to merit inclusion in the CPI, he argued in a note recently.
Zoom out: Much of the increase in the cost of homeowners insurance is due to climate change — the number of very costly extreme weather events in the U.S. has been growing.
- In 2023, 28 weather disasters caused at least $1 billion in damages (adjusted for inflation) — a record going back to 1980, according to government data.
Zoom in: Home insurance costs range widely. The states with the highest costs are prone to extreme weather events like hurricanes, wildfires and tornadoes.
What to watch: The 2024 hurricane season is set to be a doozy. The effects of those storms will show up in premiums 12-18 months later.
