NEW ORLEANS (WVUE) – The escalating insurance crisis in Louisiana, compounded by fluctuating interest rates, is significantly influencing both prospective homeowners and the construction sector.
Discussions on the repercussions of heightened insurance premiums took center stage on Wednesday (July 10) at the luncheon and meeting of the Home Builders Association of Greater New Orleans, held at the University of New Orleans.
Dan Mills, CEO of the association, spoke to FOX 8 ahead of the meeting, providing insights into the current economic landscape. “New Orleans has experienced multiple setbacks due to higher mortgage rates, which have dampened new construction,” Mills noted. “However, the new homes we are building boast greater resilience, thereby qualifying for lower insurance premiums.”
For many individuals, lenders incorporate the cost of property insurance into their monthly mortgage payments. Following the devastation caused by Hurricanes Laura and Ida in parts of Louisiana, insurance premiums have surged.
Dr. Robert Penick, Director of the Institute for Economic Development and Real Estate Research at UNO, addressed the gathering of homebuilders, affirming that rising insurance costs are posing challenges for potential homeowners. “This issue is particularly problematic for buyers,” Penick emphasized.
Builders are also feeling the impact of the insurance climate. “Their builders’ risk insurance premiums have risen,” Penick explained. “During construction, they face increased costs for builders’ risk insurance, and upon completion, the escalating reinsurance prices add to their financial burden. The question remains: where does it end?”
During his presentation to the HBAGNO, Penick presented data illustrating the decline in new single-family residential construction permits across several parishes. In 2020, there were 1,898 permits issued, contrasting with 1,047 in 2023. As of early 2024, the data indicated 408 permits had been issued by May.
Mills suggested a potential solution for homeowners looking to mitigate insurance costs. “By conducting a wind mitigation survey, homeowners can potentially reduce their insurance premiums,” Mills proposed. “For approximately $300, a licensed surveyor assesses the home’s wind mitigation features, such as architectural shingles, ring-shaped nails, straps on plates, and impact windows. Documenting these features can qualify homeowners for policy discounts.”
Despite the challenges posed by rising insurance costs and mortgage rates, Penick stressed the need for increased housing inventory. “The demand for shelter remains constant,” Penick asserted. “We must consider alternative options such as adaptive reuse of commercial properties to meet the growing need for apartment units, particularly in land-constrained areas like New Orleans.”
Looking ahead, Penick forecasted a potential decline in inflation and mortgage rates for the remainder of the year. Mills added that while many supply chain issues, such as those concerning lumber, have been resolved since the height of the COVID-19 pandemic, challenges with items like electrical transformers persist.
