Federal Reserve Chairman Jerome Powell warned Congress that in the coming decades, some regions in the U.S. may become unmortgageable due to a growing insurance crisis. As climate change intensifies natural disasters, insurance companies are pulling out of coastal and fire-prone areas, leaving homeowners with fewer options for coverage.
This shift is already happening, with major insurers canceling policies in high-risk zones. Since lenders require homeowners insurance to issue a mortgage, the lack of affordable coverage could make it nearly impossible to finance homes in these areas. Some buyers have turned to state-run insurers of last resort, which offer higher premiums and less coverage.
Powell also addressed the housing affordability crisis, stating that while lower interest rates may help in the short term, the real issue is a lack of supply—something outside the Fed’s control. He also noted that government-backed mortgage giants like Fannie Mae and Freddie Mac help keep rates lower, but their future remains uncertain.
As Maui’s real estate market navigates its own unique challenges, including insurance hurdles and shifting affordability, these national trends could have significant implications for local buyers and sellers.
Rising Insurance Costs Are Already Affecting Homeowners
Powell’s warning comes as homeowners across the country face soaring insurance premiums. In Hawai‘i, rates increased by 11.3% in 2024, a trend largely driven by climate risks and the impact of the 2023 Lahaina wildfires. If insurance costs continue to rise, securing affordable coverage may become even more challenging, further complicating mortgage accessibility in high-risk areas.
As Maui’s real estate market navigates its own unique challenges, including insurance hurdles and shifting affordability, these national trends could have significant implications for local buyers and sellers.
