$207,000. As of April, that is now the median price for a home in north Texas. It represents an average 14% increase in home prices across the metroplex over 2013. The new median home price represents an increase of almost 60% over 2010’s valuation, at the depth of the recession. When compared to the previous high water mark set in 2007, the gain is over a third.
Even with the white hot climb in single family home prices, sales of preowned homes have risen by 7% last month. Not to be outdone, sales of increases in the condominium and town home market are up 13%. A sharp decline in the number of homes for sale, 15% lower than last year, contributes to the increases. The average number of days it takes to sell a home is now averaging only 46 days, which is the lowest this figure has ever been since these records have been recorded.
These figures paint an attractive picture of the real estate market in the Dallas / Fort Worth area, especially for people selling their home. I’m excited to see the growth in our local economy as represented by these increases which have been helped by the announcements of companies moving to the D/FW area or expanding their local presence. There is an impact on home insurance rates, as well as rates on insurance for condos and town homes, that extends to both buyers and owners.
Home Buyers: Higher home prices usually correspond with higher home insurance cost. Insurance rates have steadily climbed across north Texas for the past three years. Most of the rate increases have been attributed to the high cost of weather related claims by the insurance companies, but higher home valuations are also contributing to the increased cost.
In addition, there may be a difference between a home’s purchase price or market valuation and it insured value. The insured value, is its replacement cost, what it will cost to replace the home in the event of a total loss, such as by a fire or tornado. The amount of the home’s insured value has nothing to do with the purchase price or the taxable value of the home. Depending on the home’s construction, the amount of insurance coverage may be lower, the same as, or higher than its current market value.
I’ve always talked with the mortgage loan originator, when there is a difference between the insurance value and the loan value, especially if our value is lower. This helps alleviate problems that may pop up in the days before closing. In most cases, the mortgage underwriter will agree with our value as long as our value will replace the home.
Home Owners: Existing home owners have also seen their home insurance rates climb in recent years. One of the reasons their rates have increased can be attributed to the inclusion of an inflation protection attribute in most home policies. This means the amount the home is insured for, is designed to change annually based on the rate of inflation. The purpose of inflation protection is to keep the home from becoming underinsured in times where prices to repair or rebuild a home are increasing, as they are now. This doesn’t make most policy holders happy, but it does keep them properly insured.
Whether you are a home buyer or owner, home insurance is taking a larger bite of your overall home related budget. This makes it important to compare rates every two to three years, or have an agent that will do this for you as I do. I review every client’s renewal annually to determine if we can provide a better value for their home insurance dollar. Maybe we can help you too! Share your questions, comments, and experiences with me on our Google + Facebook, and LinkedIn pages. I’d love to hear what you think!