Photo Credit: e2Value
The American housing market’s health is affected by several fluctuating economic factors. Homeowners rarely understand how these conditions affect their asset’s value due to confusing messaging from the media. Ultimately, mortgage rates, supply and demand, and national economics are the most influential components shaping what a homebuyer, seller, or investor should be focused on. Todd Rissel, CEO of full-feature asset valuation provider e2Value, advises these individuals to understand what affects their circumstances. This knowledge will help them choose the right property, have adequate insurance coverage, and mitigate future liabilities.
Property value, interest rates, and mortgage costs are just a few elements in the American housing market that are constantly changing. Like a pendulum, they oscillate from high to low. The nuanced interplay of these factors requires homeowners to be intentional about what affects their decision-making.
In the past two decades, average home values increased by over 100%. Financial crises, housing bubbles, and COVID-19 were largely responsible for these trends. At its peak from 2019 to 2021, home prices increased year-over-year by up to 30%. Surging demand and low inventory allowed sellers to control the market with an unfair advantage.
As single-family home prices rose to their highest level in 30 years, the media covered other trends influencing the market. Headlines about ‘lethargic’ home buyers, skyrocketing residential building wages, and rising homeowners insurance costs sent mixed signals to homeowners.
With conflicting storylines running amok, insurance experts like Todd Rissel advocate for homeowners to focus on the basics. When averages determine property valuations, people must recognize they’re calculating in a world full of exceptions. They should build data sets for comparison, tracking, and projections to protect assets from external risks. Only then can their asset’s unique traits determine relevant coverage plans.
Before purchasing a homeowner insurance policy, individuals should consider these four things:
- Does the insurance policy cover the structure’s entire square footage?
- Are multiple deductibles necessary?
- What risks does the policy not cover?
- Can the premium be lowered without compromising on coverage?
After considering these questions, a homeowner can choose the most suitable coverage type by conducting online research or consulting insurance brokers. Todd suggests comparing their property’s square footage, location, amenities, and beds/baths with newly constructed home listings on public websites. They can factor in the total price of that newly constructed home, including its land, to roughly estimate what value their home should be insured for.
Todd cites partial claims and total rebuilds as the two biggest risks for a homeowner with inadequate insurance. “Partial claims and total rebuilds are two distinctly different risks, but both of these situations are a nightmare for homeowners who struggle to have their assets rebuilt or repaired for years after an event.”
A comprehensive insurance policy is a homeowner’s first defense to liability and negative market conditions. Understanding what drives claims costs and how value is determined will be key to avoiding potential financial losses. Pioneers like e2Value are increasing the efficiency and accuracy of this process through its patented knowledge-based valuation system.
Written in partnership with Tom White
