Experts say the U.S. could face a “long-lasting economic shock” if property values continue to fall

Americans have not only had to deal with terrible natural disasters around the nation in recent years, but also rising prices. The former have helped aggravate in particular the housing affordability crisis that is gripping vast portions of the United States.

Insurance premiums have been soaring in parts of the nation most at risk of natural disasters, making it more difficult to keep up with high mortgages. However, those risks could also push property values lower in the coming years, in some areas it’s already begun, and cause a “long-lasting economic shock.”

What experts are saying about consequences of falling property values

David Burt, chief executive of DeltaTerra Capital, has been warning about the effect higher insurance premiums will have on the housing market. Last year he told Amy Scott on the podcast ‘A Warmer World’ that “this is actually happening right now, and is probably going to happen over the next three to five years, a full reckoning of these new costs for 15 to 20% of the homes in the US.”

While he doesn’t see prices collapsing on the scale of the Great Recession, he expects that some areas will get hit especially hard.

He explained that a cycle of higher insurance costs in those areas will make it harder for people to afford mortgages there. That in turn will depress demand and drive property values down, eventually leading some mortgage holders to default.

“If all their equity is already gone, their costs are going up a ton, they can barely afford it, that’s when people walk away,” Burt said.

The drop in property value won’t just be bad for homeowners but for the entire community in which they live. Lower property values mean lower property-tax revenue for local governments. This could deliver a “long-lasting economic shock” to those communities Burt explained to NPR.

Additionally, for many Americans, their home is the biggest asset they have, and they rely on the equity built up in them to judge the health of their overall wealth. A big drop in their home’s value may cause them to spend less in the local economy, and economy at large, if they don’t have other sources of income, further aggravating hardship for the community.

Get your game on! Whether you’re into NFL touchdowns, NBA buzzer-beaters, world-class soccer goals, or MLB home runs, our app has it all.

Dive into live coverage, expert insights, breaking news, exclusive videos, and more – plus, stay updated on the latest in current affairs and entertainment. Download now for all-access coverage, right at your fingertips – anytime, anywhere.