Last week, my office hosted a panel discussion on the hot topic of homeowners insurance. In the wake of several natural disasters, supply chain issues, and inflation on building materials, homeowners insurance is currently experiencing a “hard market”. Non-renewal and cancellation rates are rising, some carriers are leaving certain states, and specific aspects of a home, like wood-shake roofs, are being more scrutinized. This has caused coverage to increase in cost and, in some cases, not be available. We assembled this panel to get this critical real-time information in front of our clients, so they can adequately care for their home(s).

As your trusted real estate advisor who helps you transact when it is time for a move, I also see it as my role to help you protect your asset through education. While I am not an insurance expert, the esteemed panel of insurance professionals we invited to discuss the state of the homeowners insurance market is an example of a trusted advisor in the homeowners insurance field. Below are my top takeaways from the hour-long guided discussion. You can also access the event recording below, which also includes 30 minutes of Q&A from the audience.

What is RCV (Replacement Cost Value), and why is it important?
RCV is the dollar amount established to determine the cost of rebuilding your home to its pre-damage condition. This is different from market value, which includes the land and location premiums. RCV estimates the cost of materials and labor to restore or rebuild your home at today’s prices. This number is critical, and that is why it is important to always let your carrier know when you have made changes or improvements to your home. NOTE: Some carriers use ACV (Actual Cost Value), but this is not preferred as it takes into account depreciation.

Request an annual review of your policy with your carrier.
Most carriers have some built-in annual coverage adjustments, but they are often insufficient. The homeowner is responsible for reporting upgrades, additions, and improvements to their carrier so the increase in investment translates to coverage. Record-keeping of invoices and receipts helps establish accurate replacement value. Notifying your carrier of these changes will capture the appropriate coverage.

Request and review the Declaration Page in your policy.
The declaration page in your policy provides a detailed overview of your coverage. It lists what is covered, the RCV, notes additional riders, and outlines your premiums and deductibles. This is a valuable tool for helping you understand your policy and ensure that everything you have done to your home is included. You can easily request this from your carrier, and it should lead the discussion at your annual review.

Coverage vs. cost matters!
Carriers often advertise and try to appeal to customers based on the affordability of their rates. While no one wants to overpay for insurance, you must analyze the cost-benefit of adequate and complete coverage over the cheapest policy. Oftentimes, the cheapest premiums will lead to your home being underinsured.

Consider adding specific riders for additional coverage.
Unfortunately, earthquake and water backup riders are not included in your basic policy. However, you can purchase these specific riders to add them to your policy and be covered should damage be caused by an earthquake or your sewer line backing up into your home and causing a flood. Adding riders for personal property, such as fine jewelry, is common. These will be listed on your declaration page for an easy accounting of your coverage.  Make sure you ask your insurance professional what other rider options are available, so you don’t miss something you would like covered.

Align your deductible with your claim tolerance.
You want to analyze at what point you would make a claim if something happened to your home.  The theory of only making a claim if the repair or replacement amount is catastrophic is a good rule of thumb to ensure your policy is not dropped, non-renewed, or wildly increased in premium. What is catastrophic for one person may not be for another, so it is a personal preference around your financial comfort. What you don’t want to have happen is to make a claim on something you could handle on your own, and then have something big happen and no longer be covered. Always consult your insurance professional off-the-record before contacting the carrier directly, so your decision-making is not misconstrued as a claims risk.

Maintain your home to protect your premium.
Due to the industry’s tight margins, many carriers are visiting properties and performing drive-by and/or drone inspections to help determine their risk exposure. They are also accessing Google Earth to make these determinations. Homes that do not appear well-maintained are penalized with premium increases and sometimes dropped by their carriers. This is also why opening and reading all mail from your insurance carrier is essential.

The home and the human are considered in the coverage.
The home’s condition will play into the coverage and premiums, as will the human who is purchasing the policy. Carriers will examine a person’s claims history to help determine their risk exposure. It is common to look back 36 months, and if a person has multiple claims in that timeframe, they will have higher premiums and, in some cases, not be able to purchase coverage.

Have a good relationship with your insurance professional.
Whether working with an insurance broker or a captive company, having a consistent relationship with your provider is valuable. They should be available to answer questions, help you decide whether to make a claim, and review your policy and riders annually. You should never call the carrier directly without first contacting your insurance professional. They can help you navigate important decisions that will keep your coverage intact and your premiums manageable.

I hope you found this information useful—I know I did! It drove home my responsibility of managing my policy and ensuring I am adequately insured through communication with my insurance professional. Much like real estate, having a trusted advisor regarding homeowners insurance is crucial. After all, our home is often our largest asset and most prized possession. Protecting it is critical!  Click HERE to access the recording (Passcode: E+gmk9V*) to watch the panel discussion.

As always, please don’t hesitate to reach out if you have any questions or concerns about your property, and I can help guide you to the right answers. I have reputable referrals to multiple insurance professionals that can help you should you need additional contacts. My goal is always to help keep my clients informed and empower them to make strong decisions.

As your trusted real estate advisor, my service to you is beyond the transaction of buying and selling real estate. Your home is your nest egg and often your most significant financial investment, requiring care and attention to maintain and protect it. An important aspect of protecting your home is your Homeowners Insurance Policy. In the wake of several natural disasters over the past five years, insurance carriers have depleted their reserves and had to recalibrate their risk management plans. Carriers have mitigated their risk by analyzing which areas of the country have the highest likelihood of claims, as well as which consumers have the highest claim rates.

The heat map below illustrates the rate of cancelled policies nationwide based on risk, weather patterns, and claims history. Beyond available coverage, it’s essential to understand the scope of your policy and the riders that accompany it. That is why it is essential to have an annual review with your insurance provider, ensuring you are adequately covered and updating your Replacement Cost Value (RCV) as needed.

Furthermore, some carriers are revising their policies, including the states in which they will operate and the products and materials they will insure. For example, in 2025 Safeco/Liberty Mutual will stop writing new policies for condominium, renters, and watercraft insurance in the state of California. This month, they are also capping umbrella limits to $1 million in some states, forcing renewals to lower that level if they had a higher coverage amount. No company is immune to these effects, so it is important to explore your options for the most complete coverage. It is also essential to review all mail from your insurance providers as renewals approach, so you don’t miss any significant changes.

Although I am not an insurance professional, I have connections to some credible insurance professionals who can help you better understand the changing climate. Join me on May 7th for a live webinar featuring a panel of experienced insurance professionals who will share their insights and expertise on today’s rapidly evolving homeowners insurance market.

Windermere North is proud to host this educational webinar, featuring Peter Hong of Allstate Insurance, Alex Busilacchi of Moreland Insurance, and Douglas Olsen of USI Insurance Services.

The first hour will be a guided conversation covering key points and will provide information to shed light on how the volatile environment affects you and the protection of your home. Then we will open up for a live Q&A so you can get your questions answered.

Click the link below to register and receive the Zoom link, or reach out and I can send the registration link to your email. Registration closes May 4th.

Markets change fast! We experienced a substantial shift in 2022 with the first half of the year feeling like a completely different market than the second half of the year. A 3-point increase in interest rate was the main culprit along with inflation and affordability for the 2022 market correction we experienced.

A market correction is defined by prices reverting by 10% or more. In January 2022 the median price in Snohomish County started at $700,000 then peaked at $830,000 in April, and ended the year at $689,000 (-17%). In King County, the median price started at $794,000 then peaked at $1,000,000 in May, and ended the year at $820,000 (-18%). Bear in mind that the December 2022 median price was also up 17% over the January 2021 median price in Snohomish County and up 12% in King County. This illustrates that the correction was only off the peak of spring 2022 not off of the strong equity that was built prior to that intense run-up.

As we find ourselves in mid-Q1 2023 all data points and anecdotal stories are pointing to the worst of the market correction being behind us and yet again, another shift. Interest rates peaked in November 2022 at just over 7% and have since come down. Experts are predicting rates to find themselves under 6% as we travel through the easing of inflation in 2023.

The well-defined price correction and interest rates lowering have brought many buyers back to the market. In fact, pending sales in Snohomish County in January 2023 were up 52% over December 2022 and were up 3% over January 2022. Even more so an indicator: pending sales are up 80% month-to-date (MTD) in February over January 2023! In King County, pending sales in January 2023 were up 63% over December 2022 and were up 2% over January 2022, and up 61% MTD over January 2023.

This pent-up demand has come at a time when listing inventory is seasonally scarce and has tilted the market from a balanced market back to a seller’s market in many areas. Months of inventory is how we define market conditions. 0-2 months is a seller’s market, 2-4 months a balanced market, and 4 months plus a buyer’s market. In Snohomish County, we ended 2022 with 2.3 months of inventory based on pending sales, and in January 2023 had 1.2 months, and MTD is sitting at 0.9 months. In King County, we ended 2022 with 2.6 months of inventory based on pending sales, and in January 2023 had 1.3 months, and MTD is sitting at 1.1 months.

After months of price reductions and searching for the bottom, we are now starting to come across some multiple offers and price increases. This is leaving clues that the bottom was reached and that we are now stabilizing and looking toward the predicted growth that 2023 has to offer. Buyers are eager for additional selection and will welcome the spring influx of new listings. If sellers are ready, they should not hesitate. Should rates lower as the new listings arrive, sellers will be well supported by a willing buyer audience ready to absorb any growth in inventory.

Buyers need to understand that rates and prices are closely related and that waiting for rates to hit a certain point may be detrimental to securing a stabilized price. Many buyers are heading into today’s market with a refinance in mind down the road. They are aware that prices will rise as rates lower, so they are looking to obtain a lower price now with a higher rate and once the rate hits their desired level, they will refinance to lower their payment all while holding on to their lower basis point.

For example, if a buyer bought now at $750,000 with 20% down and a rate of 6.5% their monthly principal and interest payment would be $3,792. If a year from now, rates are at 5.5% and prices are up 5% and that same buyer refinances, they will save $364 a month on their payment and $37,500 in principle. This would also be $192 lower than what the payment would be at the appreciated price with the lower rate!

Real estate moves are driven by life changes. It was completely understandable that many buyers took a pause as the market corrected. Now that the market is showing signs of stabilizing these life changes are pushing buyers to find the home that better fits their lifestyle. Sellers need to keep in mind that their homes need to be priced right and show up to the market well-appointed and properly prepared to get the best results.

We’ve learned a lot over the last year. Once the historical 3-4% interest rate disappeared, consumers had to adapt to the new normal. Now that consumer sentiment is leaning towards a resurgence in demand, opportunity abounds for sellers who are ready to make a move. Please reach out if you are curious about the market trends and want to discuss your goals. It is always my goal to help keep my clients well-informed and empower strong decisions. 2023 is going to be a great year for real estate, I can feel it!

At Windermere we help people buy and sell homes, but we also help build community. I’m proud to support the Windermere Foundation which has raised over $50 million in the past 34 years for low-income and homeless families right here in our local community.

Last week, my office had the pleasure of hosting Windermere’s Chief Economist, Matthew Gardner for his 2023 Economic and Housing Forecast. During this jam-packed hour of insightful delivery, he reported on the U.S. and local economies along with the U.S. and local housing markets specific to King and Snohomish Counties. If you are interested in receiving the recording of the event and/or his PowerPoint slides, please reach out. You can also access the link at the bottom of this newsletter to get his concise forecast for the U.S. housing market.

Across the nation, we saw a real estate market correction in 2022 as interest rates doubled. Interest rates started the year at just over 3%, peaked in November at just over 7%, and ended at just under 6.5%. Since the first of the year, we are closer to 6% and anticipate rates to continue to improve towards 5% throughout 2023. The Feds utilized rising interest rates to combat inflation in an effort to create a short recession to slow the cost of all products and services after record-breaking increases during the pandemic. This has reduced spending due to money becoming more expensive to borrow and corrected prices across many industries, including housing.

The trends across the nation are consistent, but as your local expert, along with the national forecast I am committed to reporting hyper-local facts, figures, and trends to help you understand what is happening and what will happen right in our own backyard. Our local housing market was not immune to the effects of rising interest rates. Our prices peaked in the spring and as rates climbed over 6%, prices took a tumble from the spring highs inflated by cheap money. However, prices are still higher than they were in 2021 which was a recording-breaking year of price growth.

In King County, prices were up 22% in 2021, and in Snohomish County, they were up 23%. We started 2023 with higher prices over 2021, but off the peak of 2022. This is a price reversion, not a housing recession! In fact, in King County, 64% of homeowners with a mortgage have over 50% home equity and in Snohomish County, 63% of homeowners with a mortgage have over 50% home equity. Homeowners are fortified with strong cash positions which is a clear indicator we are nowhere near a housing crisis; we are actually incredibly healthy! While the highs of 2022 were wiped out, the long-term growth we have had over the last decade is the foundation and guiding light of our market. If you bought in 2022, don’t fret, just hold, values will eventually return.

The worst of this correction seems to be behind us as rates are expected to continue to improve throughout 2023 and consumers are adjusting to a more normalized market. Prices are starting to stabilize and are near, if not at the bottom, and should have modest growth in the second half of 2023. We are already starting to see pending sales pick up. Month-to-date (MTD), pending sales are up 25% in King County over December (month-over-month, MOM) and up 21% MOM in Snohomish County. This increase in pending sales is coupled with available inventory being down 15% MOM in King County and down 18% MOM in Snohomish County. Inventory remains tight with MTD inventory levels shifting from a balanced market to a moderate seller’s market based on pending sales rates in both counties.

It seems that buyer demand is improving and activity is becoming more plentiful. Buyers should take note and be ready to transact if they are poised to make a move. It is a delicate dance between prices and interest rates. Buyers must understand that they can’t change their sale price once they’ve bought, but they can always refinance and change their rate. I have even heard of lenders guaranteeing a future refinance when the rate hits a certain point. Real estate is a long-term hold investment and also where you live. If where you are at doesn’t currently meet your needs, consider a move if you plan to stay there for 5+ years.

Affordability has been a challenge in our area, so if a buyer can obtain a good price this year and then adjust their rate later by refinancing, they will have a much more affordable monthly payment down the road. This takes strategizing and planning and the guidance of a trusted lender and real estate broker. Utilizing adjustable-rate mortgages, rate buydowns, and other creative financing options has put savvy buyers in the catbird seat as they navigate this environment and make exciting moves.

Matthew’s closing words summarized the wild ride of coming off of the pandemic and where we are headed. “2023 will be a transition year when the housing market comes off the high that we saw during the pandemic when borrowing costs were artificially low. I don’t see any reason for buyers or sellers to panic at all! By the end of this year, most markets will have already corrected themselves and we will see prices and demand pick up again, but at a far more normalized pace.”

Real estate is an investment and a lifestyle decision. I am committed to following experts like Matthew and others. I also study the local market trends daily. Markets change quickly and the changes are often reported far after the actual shift. I have understood these shifts due to my daily connection to the market. I take great pride in helping empower my clients to make well-informed decisions about where they live and the financial impact it has on their lives. I love what I do because it is centered in helping people with one of the biggest decisions they will make in their life. If you or someone you know are curious about how the trends relate to your goals, please reach out. I’d be honored to help educate you and help guide and strategize your next move. Here’s to a happy and healthy 2023!