Homeowners Insurance and Housing Prices

53 Pages Posted: 6 Jun 2024

See all articles by Evan Eastman

Evan Eastman

Florida State University

Kyeonghee Kim

Florida State University

Tingyu Zhou

Florida State University

Date Written: June 03, 2024

Abstract

We use a novel dataset that contains private homeowners insurance market activities including average insurance prices, insurance cancellations, and cancellations attributable to hurricanes, at the insurer-county-quarter level in Florida. We merge the dataset with individual property-level transaction data in Florida. Using insurance supply-side factors as an instrument for insurance prices, we report that a 10% increase in average homeowners insurance prices leads to a decrease in housing prices of at least 1.2% to 2.1%, with pronounced effects on risky areas and in areas with a high prevalence of insurance policy cancellations due to hurricanes. Our results are robust to using both house price indices and individual housing transactions, to including comprehensive location-specific or property-specific fixed effects, and to including a rich set of time-varying locational and housing attributes. In addition, our results are not driven by disaster-related factors and are more pronounced in areas with a higher prevalence of mortgages and GSE loans. Our findings shed light on the critical role of homeowners insurance in the housing market and suggest that its availability and pricing stability are significant factors influencing property values. To our knowledge, this is the first study to explore the effects of private homeowner insurance on house prices.

Keywords: Homeowners insurance price, Residential property, Climate change, Housing value

JEL Classification: G22, G52, Q54, R31

Suggested Citation

Eastman, Evan and Kim, Kyeonghee and Zhou, Tingyu, Homeowners Insurance and Housing Prices (June 03, 2024). Available at SSRN: https://ssrn.com/abstract=4852702 or http://dx.doi.org/10.2139/ssrn.4852702

Evan Eastman

Florida State University ( email )

College of Business
Tallahassee, FL 32306
United States

Kyeonghee Kim (Contact Author)

Florida State University ( email )

College of Business
Tallahassee, FL 32306
United States

Tingyu Zhou

Florida State University ( email )

821 Academic Way
Tallahassee, FL 32306
United States

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