PART 4: Home insurance and down payment impediments for buyers gain momentum: On March 23, 2024 the Los Angeles Times reported that State Farm won’t renew 72,000 insurance policies in California, worsening the state’s insurance crisis. 30,000 of those policies are homeowner policies. Although the policies not being renewed represent less than 3 percent of State Farm’s California policies, they come at a time when homeowners in many states are finding it difficult to insure homes as insurance companies increase rates dramatically, limit coverage, or stop offering policies susceptible to natural disasters. State Farm reported a net loss of $6.3 billion in 2023 after a loss of $6.7 billion in 2022. In many states homeowners without mortgage obligations are choosing to continue ownership without insurance – a high risk way to save money.
With only about 20% of homes for sale nationally now affordable for the typical household, homeownership for first-time buyers is often a stretch. In order to make a 10 percent down payment, the typical family in even low cost housing locations face 5-10 years in order to save the required down payment. In more expensive markets, that time period might be more like 13-19 years, New rules for home buying scheduled to take effect in July of 2024 will allow changes in how real estate commissions are paid to buyer’s and seller’s agents. In the meantime there will be a great deal of public discussion as these new rules are finalized and clarified. These new rules will be a major determinant of what buyers will need to budget for closing costs. Of course buyers and sellers can always enter into sales transactions without qualified representation, but that too might be a high-risk proposition.