The insurance crisis is making it a lot harder for people interested in buying a home.
"If you make anything less than $4,000 a month in this market, it's a problem," said Vernon Jenkins, Southwest Funding Branch Manager. Jenkins said home ownership is not affordable for many families with high interest rates and insurance costs. "Couple those two things together and it is really, really difficult because your monthly payment is going to be so high because with insurance, it increases your cash to close which is a whole other issue."
The current national average interest rate for the benchmark 30-year fixed mortgage is about 7%. He said high insurance premiums are making it a financial burden for home buyers, "If you try to buy a loan with me, if you don't have insurance, insurance companies, they cut it off as soon as a storm is in the Gulf. You can't even get insurance, but the cost of insurance right now because of the hurricanes, it's so astronomical," said Jenkins. He said this is a bigger issue for homeowners who live in Iberia and Vermilion Parishes.
Owner of Lulu David Real Estate, Lulu David, said the inventory is also playing a factor in purchasing a home because most people are looking for a home under or around $350,000 and there's just not enough homes around that price point, "We're getting good faith estimates prior to going look at a house. This is about how much insurance is. This is about how much you're paying a month and so buyers are like we can't afford that so now it drops them in a price range lower. Well, it drops them in a lower price range of affordability but we don't have the inventory to find them something."
Louisiana officials hope that a series of bills championed by Insurance Commissioner, Tim Temple, will help stem the rise in costs.
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