The housing market has been the subject of conversation in recent years.

Home prices are on the rise as the market becomes more competitive, while annual incomes grow significantly slower. You may have seen reports on how homes have become too expensive for the majority of Americans.

But is this the case for homeowners in every state and region?

Not necessarily.

A recent report by the Brookings Institute broke down the U.S. housing market. The policy researchers found that these reports of unaffordable homeownership are more of a major regional issue, rather than a national crisis. https://www.brookings.edu/research/housing-in-the-u-s-is-too-expensive-too-cheap-and-just-right-it-depends-on-where-you-live/

The report set the standard for home affordability at three times a person’s annual income, without risking financial jeopardy. The majority of American’s live in areas with home price-income ratios between 2.5 to 4, meaning home prices are 2.5 to 4 times that of a residents’ annual income.

What they found was home unaffordability was mostly an urban, coastal city problem. Whereas the South and the Midwest have the least amount of unaffordable neighborhoods. But only five percent of U.S. neighborhoods have homes priced over eight times the residents’ annual income.

And, as you may have expected, rural, suburban and small metro areas have affordable price-income ratios, with rural being the most affordable, while urban areas carry significantly higher rates.

It’s not surprising that recreation areas and scenery play a large role in a neighborhood’s housing prices, but the report found a surprising insight about bodies of water. Oceans generate exceedingly high price-income ratios, but neighborhoods around the Great Lakes showed rather low ratios. The same applied to other inland, freshwater neighborhoods. This insight can serve well for home-seekers looking for larger bodies of water when coastal waters exceed their price range.

Fortunately, MIAA can open up markets. Agents on the coast can access homeowners in the Midwest, and vice versa.

So what does this mean for insurance agents?

Insurance agents in the Midwest have less to worry about than those along the coasts. But with booming coastal housing markets, home-seekers may start looking inland for homeownership, which will certainly play a role in housing markets. In addition, any recession will increase the number of people heading inland, like what was seen in the 2008 recession.

When accessing insurance rates, agents must always consider the homeowner’s income, but also home much their property value will fluctuate throughout the years. What will the housing markets look like in the upcoming decade? How will expanding businesses impact these areas? Plus, the current economy allows people to make purchases and provides them with the financial stability and opportunity to finally move.

What are homeowners to do? Which direction should insurance agents guide them?

This issue essentially boils down to a region-by-region, case-by-case strategy for homeowners.

Which insurance will be most beneficial to each individual homeowner’s situation? Replacement costs? Market value? Something else? What’s the age of their house? Is this neighborhood destined to boom? These are the questions every agent must ask when looking at policies for their clients.

On one hand, a replacement policy will help a family reconstruct damage property without any financial hindrance. But replacement costs can change due to market conditions. If the home’s value depreciates, the policyholder will be paying too much. If their neighborhood booms, a family may experience considerable financial strain barring any property damage.

On the other hand, homeowners with older homes might benefit from a market value policy for older homes, since restoration would be considerably higher than the home’s current conditions. But homeowners may be financially strapped if the home takes significant damage.

It is very common for agents to take in all of these considerations, most already do. Agents should monitor any significant changes in the markets and reevaluate their clients’ policies as the housing market ages toward its next era. Your policyholders will appreciate you looking out for them. Plus, this simple gesture could save a family from financial catastrophe caused by an unwanted disaster, and that’s the whole point of insurance.