Rising insurance costs are chipping away at home values 

New research suggests that the rising cost of homeowners insurance is eating into home values — particularly in areas that are at greater risk of being devastated by hurricanes, wildfires and other climate-related events.

In a study recently shared with The New York Times and published separately, researchers with the National Bureau of Economic Research concluded that home price growth has dropped by over $40,000 in the areas most exposed to natural disasters.

The report, which analyzed more than 74 million insurance premiums between 2014 and 2024, also found that rising premiums may further reduce demand for properties in vulnerable areas.

"We find that (insurance) premiums are most sensitive to rising reinsurance prices in zip codes where catastrophic risk is expected to increase, suggesting that global investors are already starting to reprice disaster risk," the study's authors wrote, adding that this is causing a relative home price decline of 11% in those riskier areas.

Louisiana is one of the states that has been hit hardest by rising insurance costs and the resulting impact on home prices. The New York Times' report noted that while U.S. home prices have climbed about 55% since 2018, New Orleans home prices have only increased by 14% — below the rate of inflation.

More homeowners opting out: This rise in rates is leading to an alarming number of homeowners opting out of insurance altogether, according to Nancy Vanden Houten, a lead economist at Oxford Economics. 

A recent report by the organization found that 14.1% of U.S. homeowners didn't have insurance in 2024, up from 13.4% in 2023. West Virginia, New Mexico and Louisiana topped the list, with more than 20% of homeowners in each state doing without insurance.

Costs expected to keep rising — at least for now: Homeowners insurance premiums are expected to continue climbing for at least two more years, according to John Rogers, chief data and analytics officer at Cotality. 

While speaking at a recent ResiDay event, Rogers noted that Cotality is forecasting an 8% rise in 2026 and in 2027. The average annual change in homeowners insurance premiums was 14% in 2023 and in 2024, according to Cotality, and is expected to be 10% in 2025.

The number of homes facing climate-related hazards is also expected to increase. About 12% of the U.S. housing stock is in high-risk areas, according to Rogers, and that share is expected to increase to 20% by 2050.

During his presentation, Rogers also noted that more technology — particularly artificial intelligence and image analytics — is being deployed to protect high-risk areas and rebuild communities that have been hit by climate-related disasters so that they can be more resilient moving forward.

"We can rebuild things safely," Rogers said, adding that this resilience-focused approach can lead to lower insurance premiums.