Climate change is impacting the home insurance industry and damaging the U.S. housing market

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As climate risks continue, a standoff has developed over who should pay the cost of insuring homes against ever-growing risks.

As insurance becomes scarce in some areas and its cost surges, homebuyers are walking away from deals more often than in the past. When Michael Monaghan, a real estate agent with Coldwell Banker Sellers Realty in northern California, got an offer for a home in Bayside at the seller’s $650,000 list price in September, he told the buyer’s agent that the buyer needed to start looking for insurance immediately.

“With many carriers pulling out, that leaves other companies underwriting these really expensive policies,” said Monaghan. “Policies that cost $10,000 for a year? That is impossible for some buyers who have to pay that all at once with their closing costs.” But even if a buyer can pay their insurance costs up front , buyers still have backed out of deals, worried thatHe said buyers wonder, “Will be able to afford it next year? Will their policy be canceled? Then, if they can’t get another insurer, their loan gets called. It is a never-ending death spiral.”

“It is a very bad situation,” said Monaghan. “What insurers say goes. Even if they have flawed maps or are relying on third-party information. They think it is going to get a lot worse over time.” As insurance becomes scarce in some areas and its cost surges, homebuyers are walking away from deals more often than in the past, said Amy Bach, executive director of United Policyholders, a personal insurance consumer advocacy group based in San Francisco.

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