Rising Natural Disasters May Limit Mortgage Availability in Future
The insurance crisis, driven by escalating natural disasters from climate change, may hinder mortgage accessibility in certain regions. Federal Reserve Chair Jerome Powell raised concerns that in the next 10-15 years, areas deemed high-risk may face a shortage of mortgage options.
Insurers have been revoking policies nationwide, leaving homeowners vulnerable. State-designed insurers of last resort, often with higher premiums and limited coverage, are increasingly utilized as traditional options dwindle.
Powell emphasized that lenders and insurers will become hesitant to provide coverage and loans in areas where disasters are prevalent. Questions about high housing costs persist, highlighting the dual issue of interest rates and supply shortage, the latter being beyond the Fed's influence.
While interest rate normalization may alleviate some affordability concerns, demand could rise, potentially offsetting any rate decreases.
Regarding the future of Fannie Mae and Freddie Mac, Powell acknowledged their role in keeping mortgage rates low. However, Congress will ultimately decide their fate, with potential benefits from returning housing finance to the private sector in the long term.