Weather, inflation push insurance costs up
The costs of insurance claims are rising to their highest levels in years, driven by inflated replacement prices and the increasing frequency and intensity of climate-related disasters.
All Peril severity — the cost of claims that arise from all types of risks — rose by 9% from 2023 to 2024, the highest it has been in seven years, according to the 10th annual U.S. Home Trends report by analytics firm LexisNexis Risk Solutions.
The All Peril loss cost was 49.7% higher than in 2019. In 2024, the U.S. experienced 27 climate disasters, resulting in more than $1 billion in damage.
Notably, in some cases, costs rose even as frequency fell. The country experienced 5,373 hail events that resulted in insurance claims in 2024, a decrease from the previous year, according to the study. However, the loss costs for the events were still up for the year and 19% higher than the seven-year average.
The cost of hail damage in 2024 exceeded $3 billion, marking a multidecade upward trend from less than $500 million in 2000.
"U.S. home insurers are facing two converging challenges: climate-driven catastrophes intensifying and inflation continuing to drive up repair and replacement costs," LexisNexis Risk Solutions vice president George Hosfield said in a release. “These pressures are helping to contribute to higher premiums for U.S. consumers as carriers work to manage rising loss costs.”
Forecast predicts fewer new homes, sales rebound ahead
Builders are expected to produce fewer homes in the near future, with sales virtually flat until next year.
Average housing starts per quarter for 2025 are expected to be 1.346 million nationwide, down 1.5% year over year, according to the monthly housing report from mortgage giant Fannie Mae. Starts are expected to fall even further next year to an average of 1.308 million per quarter.
Home sales have been nearly static. Average quarterly sales for 2025 are expected to be $ 4.738 million, a 0.2% decrease from 2024.
However, Fannie Mae predicts a significant jump in sales in 2026, starting in the second quarter, with a quarterly average of 5.159 million, up 8.9%. New construction sales are expected to rise to an average of 704,000 per quarter, while existing-home sales are projected to leap up 9.6% to an average of 4.455 million per quarter.