Morning Report: Insurance rates are on the rise

Posted on January 8, 2024 by Brent Nyitray

Vital Statistics:

Stocks are higher this morning on no real news. Bonds and MBS are down.

The week ahead will be data-light, as is typical in the week after the jobs report. The most important number will be the consumer price index report on Thursday. Q4 earnings season kicks off Friday with earnings from the big banks.

Losses in commercial real estate will be a focus, especially with vacancies in office properties hitting record levels going back to the 1970s.

According to BLS, the economy created about 2.7 million jobs in 2023. The initial estimates were just over 3 million, so we had 329,000 downward revisions in payrolls throughout the year, not counting December, which we won’t get until later this year.

Home and auto insurance rates are going up and insurers are threatening to pull out of states that don’t permit them to increase rates to cover rising costs. The costs of natural disasters are going up, especially in states like California and coastal states with hurricane risk. This will have the effect of pushing up mortgage payments for those who escrow, making the affordability issue even worse. Some states like California risk becoming insurance deserts where nobody wants to do business. Note that most states have a commission which tells insurance companies how much they are permitted to charge. If the regulators drive too hard of a bargain, the insurance companies can choose to stop doing business in those states.

Asking rents declined0.8% YOY in December, according to data from Redfin. “High supply—more so than low demand—is driving rent declines. But if mortgage rates continue to drop at a fast clip in 2024, slowing rental demand could become a major driver of rent declines,” said Redfin Economics Research Lead Chen Zhao. “That’s because more Americans would ditch the rental market to become homeowners, leaving landlords with even more vacancies.”

Vacancy rates are climbing back after their post pandemic lows. The US has a record number of multi-family units under construction, so more supply is on the way.

Filed under: Economy | 17 Comments »