Increase in owner-occupied homes leads to growing insurance exposures

By Steven Weisbart, Chief Economist, Insurance Information Institute

For a dozen years – from 2004 through 2016 – the number of owner-occupied homes in the U.S. was virtually unchanged at about 75 million, even though the population grew by more than 30 million during that time span. In the same period, the number of renter-occupied residences spiked – from about 33 million to about 43 million. Both trends persisted through the Great Recession, and on into the recovery, during which time mortgage interest rates plummeted, and many homes went on the market at bargain rates, thanks to foreclosure or short sales.

The implications of these trends for the homeowners and renters insurance exposure bases are easy to see: very little exposure growth in the homeowners market – except for renovation of existing homes and total replacement of older homes with newer ones – and substantial exposure growth (about 30 percent) in the renters market. Premium growth in these lines were affected, since the vast majority of owner-occupied homes are insured, but only 40 percent of renters buy renters insurance.

Based on data released by the Census Bureau on July 26, 2018, we feel confident in saying that these trends have reversed. The number of owner occupied homes as of the second quarter of 2018 is nearly 78 million, and it has increased in every quarter except the third quarter of 2016. The number of renter-occupied homes was 43.9 million in the third quarter of 2016, but dropped to about 43 million by the second quarter of 2018.

As a result – even ignoring the increasing cost of rebuilding damaged homes and content – if the trend holds, homeowners insurers should expect to see a growing exposure base in this line.