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So now more than ever, with inventory low, it’s imperative to work on your professional defects. The alternative is relying on what clearly isn’t working already. Easier said than done, I know. But let’s dig into what’s really behind the inventory shortage since it surely isn’t just interest rates.
Despite far higher rates, inventory remains at record lows. The Fed seems to think cranking rates will fix housing, but they’re ignoring a major underlying issue: we’re massively under-insured as a nation. This insurance gap is exacerbating our inventory crisis.
Let me explain. Across the country, insurance companies are pulling out of markets and jacking up rates. In California, home policies are being non-renewed, policies cancelled, and costs are skyrocketing. Sellers can’t sell because they’ll lose coverage. Buyers can’t buy because policies are scarce. People sit idle as the insurance market spirals.
The culprit is under-insurance due to inflation. Most homeowners’ coverage hasn’t kept pace with rising home values and replacement costs. This has made payouts extremely costly for insurers, especially after major disasters like wildfires.
In California, the insurance commissioner won’t let companies raise rates enough to adequately cover higher risks and costs. So providers simply leave the state rather than operate at a loss. People are forced into the state’s limited and expensive FAIR plan. It’s a mess.
The inventory logjam persists because under-insurance prevents normal buying and selling. And the Fed’s rate hikes, while impactful, can’t fix this. It requires insurance reform.
So here’s what needs to happen: States must ease rate restrictions so coverage can be properly priced. Costs will rise in the short term but market competition will take over. Homeowners also need to voluntarily raise their limits. Yes, premiums will jump. But isn’t it worth it to have proper coverage and keep the market fluid?
This isn’t a simple fix. But addressing under-insurance would help inventory by getting buyers and sellers moving again. The Fed should pay attention. Their toolkit may be limited but housing issues run much deeper. It’s time to stop pointing fingers at interest rates and work on the real solutions.
I recently heard someone wisely say “if you’re not working on yourself, chances are you’re living off your defects.” This got me thinking about the current state of disrepair in the real estate industry and the struggles many professionals like you face.
When business is slow, it’s tempting to just coast along or even regress into bad habits that got you here. But this market demands more. You can’t just react, lay blame, or sleepwalk through your workday. The issue isn’t the market itself but how you operate within it.
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