A looming insurance shock is causing trouble for the Florida and California housing markets

Home insurance companies are pulling out of California and Florida, at alarming rates. Earlier this year, State Farm, California’s largest property insurance company, Show More

Interestingly, Finnegan said, “concerns about costs are keeping people in rental units longer.” For someone who may have been considering buying a home, and has already stretched out their budget to afford the monthly mortgage payments, these increases in property insurance put that out of reach.

Insurance problems may be a secondary concern, Finnegan said, but he still thinks the issue at hand is “serious.” Up to this point, he said, the builders have been able to motivate buyers during Mortgage purchases, for one. The longer rates stay above 7%, the greater the stressful housing affordability insurance issues in California and Florida.

“With mortgage rates still going up, these markets have more risk than, say, Georgia or Texas or Colorado, where these insurance concerns aren’t as prominent,” Finnegan said, pointing to the fact that many potential buyers are already bidding. Wrap their heads around monthly mortgage payments that have more than doubled in just a few years, and high insurance costs make owning a home unaffordable. Perhaps it means that people are continuing to rent for longer, Finnegan noted, or perhaps it means that a family who was going to move to Florida chose not to, or delay their move, instead.

“If these natural disasters, or severe weather get worse, I can see this exacerbating and the impact actually getting worse,” Finnegan said.

The big risk, in his view, is the impact of insurance concerns on housing demand. For California, this could cause more people to move out of the state, Finnegan explained, and for Florida, it could cause fewer people to move there. As we head into the fall, we may see a seasonal slowdown in some markets and “if the insurance issue continues the way it is, or gets worse, it’s going to have a bigger impact,” Finnegan said.

This story originally appeared on Fortune.com

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