A growing number of both renters and homeowners expect to be impacted by natural disasters in the next five years, according to Freddie Mac’s analysis of data from the Survey of Household and Economic Decisions (SHED). According to the survey, more than one-third of respondents believed it likely that they will be affected by a natural disaster within that same timeframe, a staggering number.
This year alone, 20 natural disasters have been reported, each causing in excess of $1 billion in damages. These reckonings with nature’s wrath have put the scare into households nationwide, which was born out by Freddie Mac’s analysis of the SHED.
To illustrate this newfound urgency, Freddie Mac reported that a number of measures are being taken to safeguard homes financially, whether the occupants were renters or homeowners. Responses to the increased rate of natural disasters demonstrate an increased urgency in the face of a reduced ability to be equipped for said disasters.
The data is particularly timely in the aftermath of Hurricane Helene, which caused tremendous damage and loss of life across the southeast United States. This type of catastrophic damage, with storm surges estimated at 20 feet or more, has become all-too-common in recent years.
One measure to prepare for these events considered by consumers was relocation. Freddie Mac’s analysis showed that one in seven (14%) households considered uprooting and moving to a different locale in the year 2023. This trend was especially prevalent among the young, with roughly 16% of respondents aged 18 – 44 considering a move, while roughly 8% of older respondents (above 60) considered a similar measure. These trends may continue to worsen with the advent of more severe storms like Helene impacting the American mainland.
Older respondents were also more likely to consider shoring up the property they were already inhabiting, with 23.3% of homeowners surveyed electing to make resiliency improvements to their property in 2023, up from 17.6% of homeowners who took similar measures in 2022. This shows the accelerating nature of urgency for people who are thinking ahead.
People earning between $25,000 – $50,000 were also more likely to be temporarily displaced, and in accordance with that, make property improvements. This highlights the vulnerable nature of low-income homeowners who don’t have the resources to devote to property improvements, in spite of the fact that there may well be increased need.
The ever burgeoning cost of homeowners insurance was also a key factor in Freddie Mac’s analysis of the SHED. The rate at which homeowners bought insurance was 5% of 2023 respondents, which was statistically unchanged from 2022. Insurance companies’ calculations may have priced a significant number of people out of their product’s market entirely, due to the fact that the growth of their price hikes have outstripped the average homeowner’s rate of earning.
The analysis showed that homeowners with a mortgage were likelier to invest in homeowners insurance than people who owned their homes outright. Renters were in lockstep with homeowners in terms of the demographic of folks who chose to buy additional insurance.
Wealthier households were more likely to purchase homeowners insurance, while young households tended to buy homeowners insurance at a higher rate. An additional interesting wrinkle was that minority households bought homeowners insurance at a greater rate than white households.
This lack of ability to be prepared adequately for what’s to come may paint a dim picture for the future unless something is done to increase financial security. Freddie Mac’s analysis shows that the issue is becoming far more top of mind than ever before.
