Surging Property Insurance Costs Heighten Housing Affordability Strain

A new report from ICE Mortgage Technology, the September 2025 ICE Mortgage Monitor Report, paints a stark picture of the mounting challenges for homeowners and prospective buyers due to soaring property insurance costs. These rising insurance expenses are quickly becoming one of the leading contributors to the affordability crisis in housing.

Record-Breaking Property Insurance Costs

The average annual property insurance payment for single-family homeowners with mortgages has now reached nearly $2,370, accounting for 9.6% of the average monthly mortgage-related expenses which includes principal, interest, taxes, and insurance (PITI). This represents the highest share of total homeownership costs on record, underscoring the growing impact insurance premiums are having on household finances.

“Property insurance costs are the fastest-growing component of mortgage payments, significantly outpacing increases in mortgage principal, interest, and property taxes,” said Andy Walden, Head of Mortgage and Housing Market Research at ICE. “While we’ve seen typical increases in other areas of homeownership costs, the rise in property insurance costs has been unparalleled—up 4.9% in 2025 alone, and an alarming 11.3% year-over-year. Over the past five-and-a-half years, insurance premiums have surged nearly 70%.”

This surge in insurance premiums is now eating into a significant portion of monthly housing-related costs. On average, homeowners are paying $1 for every $10 spent on their mortgage-related expenses towards insurance premiums alone, a trend that has put additional strain on many household budgets.

Key Trends Driving Property Insurance Costs

Insurance Rate Growth: While the first half of 2025 saw a 4.9% increase in property insurance costs, this is still lower than the 7.3% rise observed in the first half of 2024. Despite this slower pace, insurance costs remain historically high, continuing to outstrip other housing-related expenses.

Insurance vs. Other Housing Costs: Over the past five years, insurance premiums have surged by 70%, compared to 23% for mortgage principal, 27% for interest, and 27% for property taxes. This widening gap underscores the escalating burden of insurance on homeowners’ budgets.

Cost Per $1,000 of Coverage: The cost for every $1,000 of coverage has risen by $0.29 (5%) year-over-year and $0.85 (16%) since 2022. This is a stark reminder that rising premiums are not just tied to increased home values but also reflect the growing cost of coverage itself.

Geographic Disparities: Regional disparities have become increasingly apparent, with states like California experiencing steep hikes in insurance premiums. For instance, Los Angeles saw a 9% increase in premiums during the first half of 2025, and 19.5% year-over-year. Conversely, Florida long known for high property insurance costs has seen some moderation, with premiums in some areas even declining.

State-Backed Plans: There is a significant shift in reliance on state-backed insurance plans. Florida saw a decrease in the percentage of homeowners relying on these plans, from 25% to 16% over the past 18 months. Meanwhile, states like California and North Carolina have seen an uptick in their residents turning to state-backed options as private insurance becomes increasingly costly.

The Financial Burden on Homeowners and Renters

As property insurance continues to rise, it is becoming one of the main factors squeezing housing affordability. For the average American, this means a growing financial burden that outpaces both income growth and inflation. A recent First American report highlighted that from 2021 to 2023, property insurance premiums surged by 21%, costing homeowners an additional $300 per year on average. This increase has far outpaced wage growth and general inflation, further stretching household budgets and making homeownership increasingly difficult to attain.

The surge in natural disaster risk and construction costs has further compounded the problem, as homeowners in disaster-prone regions are forced to pay more for coverage. According to the National Oceanic and Atmospheric Administration (NOAA), the number of billion-dollar disaster events has tripled over the past few decades, exacerbating insurance costs. From 2020 to 2024, the U.S. has seen an average of 23 such events annually, compared to just seven per year from 1980 to 2019. These events are driving higher claim payouts and pushing premiums to new heights.

The South Faces Steepest Increases

The South continues to bear the brunt of escalating property insurance premiums, with eight of the top 10 cities with the fastest-growing premiums located in this region. New Orleans stands out with an astonishing 51% increase in premiums from 2021 to 2023, pushing average costs above $3,500 annually.

Other cities in the South, like Jacksonville, Tampa, and Orlando, have also seen large increases, with premiums rising by 38%, 33%, and 31%, respectively. The impact of severe weather events, such as hurricanes, tornadoes, and hailstorms, is driving the increases across the region.

Even inland cities like Richmond, Atlanta, and Houston have seen significant hikes, as these areas experience growing exposure to tornado, hail, and wind damage. The cost of insurance is rising rapidly in these cities, making homeownership less affordable for many.

Disastrous Wildfires Impacting California’s Housing Market

California has not been spared from the rising cost of property insurance, particularly in areas affected by wildfires. A recent report from Redfin found that wildfires in Los Angeles destroyed property worth $51.7 billion, with about 11,000 residential properties in the city impacted. The Pacific Palisades fire, which was one of the most destructive in California’s history, was responsible for much of the damage. Although this analysis excluded other devastating wildfires, such as the Eaton Fire, the total value of homes destroyed far exceeds $51.7 billion.

As homes in fire-prone areas are increasingly difficult to insure, premiums have skyrocketed, and many homeowners are seeing their coverage options diminish. The California FAIR Plan, which provides insurance for high-risk areas, is seeing an unprecedented number of policies, as private insurers pull back from disaster-prone areas.

Conclusion: A Growing Affordability Crisis

As property insurance costs continue to climb, they are becoming a significant obstacle to homeownership. The South remains the hardest-hit region, with residents facing premiums that are increasing at a rate far beyond wage growth and inflation. Meanwhile, wildfires in California and the growing risk of natural disasters nationwide are continuing to drive up costs. With insurance premiums consuming an increasing share of monthly housing-related expenses, the dream of homeownership is slipping out of reach for many prospective buyers, particularly in high-risk regions.

For homeowners and homebuyers alike, property insurance is now a major financial burden that needs to be addressed. The rise in premiums underscores the urgent need for better risk management practices, policy reform, and greater investment in infrastructure to mitigate the effects of natural disasters. Until then, the affordability crisis in housing is likely to worsen, with insurance costs playing an outsized role in shaping the future of the housing market. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.