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Why Real Estate Insurance Premiums Are On The Rise—And What Owners Can Do To Prepare

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Balconies on the front of a multifamily building set against a blue sky.

If you’re a real estate owner or investor, you may have noticed a significant increase in insurance costs compared to previous years. In fact, renewal increases have jumped 20% year-over-year, according to Q3 2020 data from Marsh’s Global Insurance Market Index, a measure of global commercial insurance premium pricing.

“This increased expense can affect a property’s net operating income (NOI) and thus its bank and appraisal valuation,” explained Matt Swerdlow, Director, Capital Services, Ariel Property Advisors. “Higher expenses and a lack of rent growth in NYC will lead to some borrowers facing difficulty in refinancing their existing mortgages. Because higher insurance costs eat into a property’s bottom line, this trend of climbing premiums is one that commercial real estate investors need to manage actively.”

Property and liability insurance for commercial real estate is usually bundled and provides protection against damage, fire, theft and third-party claims. Property insurance is one of the “must-have” items on a building’s expense list and the recent jump in insurance premiums raises the question of what exactly is causing these spikes.

“When it comes to insurance, today’s market has fewer carriers, less competition, less broad coverage and higher premiums,” noted Swerdlow. “Both global and local factors are creating this trend.”

First, today’s low-interest-rate environment is preventing insurance companies from achieving the typical level of yield they would expect through normal investment activity. Since today’s returns are not sufficient enough to cover existing settlements and new claims, carriers are forced to increase premiums to offset the difference while still creating shareholder value.

In fact, historic jumps in the occurrence and magnitude of natural catastrophes has forced carriers to pay larger settlements with higher frequency. When insurance companies find themselves in an environment of increased payouts they’ll raise overall premiums across the board in order to cover their increased obligations.

Longer lead times to settle claims from a backlog in open cases throughout the COVID-19 pandemic has also contributed to some carriers refusing to provide certain coverage at all.

According to a survey from The Council of Insurance Agent and Brokers, 90% of respondents reported carrier capacity for Umbrella risk decreased in Q3 2020, demonstrating a significant crisis in capacity for the line. Nearly 80% of respondents also said that capacity for Commercial Property was cut substantially in Q3 2020.

In New York City, substantial hikes to insurance premiums over the past few years have made it more difficult for landlords to manage their expenses actively.

“In 2017, it was a typical assumption by an apartment landlord to pay about $500 per unit in insurance costs. The figure now hovers closer to $650-$750 per unit, or even higher for deeply rent-stabilized properties because of perceived infrastructure concerns,” Swerdlow said.

How This Affects NYC’s Rent-Stabilized Apartments

Rent-stabilized buildings are prone to deferred maintenance and so they often encounter more HPD and DOB violations. The Housing Stability & Tenant Protection Act of 2019 (HSTPA) is magnifying this issue, deterring landlords from addressing these repairs and allowing them to accumulate.

Rent-stabilized apartment buildings in the Bronx, for example, are suffering disproportionately from insurance pricing spikes. There is a lack of insurance carriers servicing the Bronx and many carriers don’t provide lead coverage for properties built between 1960 and 1978. Ariel Property Advisors has observed in some cases that typical premiums in the Bronx could exceed $1,000 per unit.

“When facing increased expenses, landlords typically will increase rent to cover this growth. But the HSTPA has capped rent increases on rent stabilized buildings to less than 2% Y-O-Y. Everyone in the city knows taxes and utilities go up every year but now insurance costs are rising dramatically as well,” Swerdlow said.

Typically, NYC borrowers refinance every five years and hopefully return some equity during the process. However in 2021, stagnant rent growth, occupancy struggles, and collection issues coupled with increased cap rates for these properties has dramatically pushed down values. This could result in a “cash-in” refinance, where the new loan is smaller than the existing loan. Ultimately, borrowers will be left with contributing fresh cash equity in order to close the refinancing or considering a sale.

One of Swerdlow’s clients in the Bronx, in the midst of a dwindling carrier supply, needed more than a month to find a competitive policy. Swerdlow notes, “When facing a time of the essence closing or an existing loan maturity, borrowers don’t have much time to shop for a better policy. It’s crucial now that landlords act proactively to avoid these situations down the road.”

On another assignment in South Carolina, Swerdlow and his team observed a $50,000 per year increase in premiums due to a lender’s heightened insurance requirements stemming from an item that came up on the Property Condition Assessment (PCA) and a recent tornado. The resulting decrease in net operating income would have made the transaction unfeasible if it weren’t for Ariel Property Advisor’s inserting an insurance specialist to restructure the borrower’s umbrella coverage. This allowed for a lower premium on the subject property and generated enough Net Income to close the refinance at the quoted terms. 

What Owners Should Do Now

Swerdlow recommends that owners should become familiar with their current policies prior to or early in the financing process to avoid any surprise pitfalls. Now more than ever it’s important to make sure one has the right relationships in place to find creative solutions to help reduce the cost of their insurance. Insurance specialists can look through one’s policies to see if there is any extraneous coverage and provide active risk management to implement different loss control strategies to potentially limit the severity or reduce the impact of a claim.

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Luxurious Mountain Living In 3 Markets For About $2.3 Million

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exterior and mountain view 312 North French Street BRECKENRIDGE, CO, USA

For some, there’s nothing better than to get away from it all; for others, even the idea of exploring the great outdoors may seem like more of a chore than a vacation. In this week’s look at luxury real estate around the world, I took a look at three properties in cities popular among outdoor enthusiasts that buck the notion that roughing it can’t be done in comfort and style.

From a high-end condominium overlooking Whitefish Lake in Montana to an updated Victorian home in downtown Breckenridge, here’s a look at what about $2.3 million buys right now in three mountain markets.

Breckenridge, Colorado | $2.38 million

Located about two blocks from Main Street on North French Street in Breckenridge, this updated Victorian-style home is steps away from the charming downtown area full of boutique shops, dining and spas. The area is also popular for its proximity to the BreckConnect Gondola, which lies about two blocks from the property.

Features: Fanciful trim and detailing on the exterior lend a whimsical touch to the home, which takes in sweeping mountain and tree-top views. Recently remodeled, the two-story home features a cozy living room with picture windows and a fireplace filling two walls. A dining room and a kitchen adjoin the living room space. The streamlined kitchen has been updated with new cabinetry, dark subway tile and a stone-topped breakfast bar for a more modern feel.

Other perks: The 2,236-square-foot floor plan has five bedrooms and 3.5 bathrooms that can accommodate up to 12 adults (15 total with children). One of the front-facing bedrooms opens to a balcony with mountain views. 

Represented by: Michele Hart, Slifer Smith & Frampton Real Estate


Truckee, California | $2.36 million

For those in the market for a more amenitized living situation, there’s Village Walk Skyline near the Northstar Village ski resort in Northern California’s Tahoe-Truckee area. Located at the peak of Northstar Village, the sustainably constructed residences offer curated living spaces with some of the most spectacular views in the area. A short walk to the village area is another reason why these luxury townhomes sold like hotcakes in 2020.

Features: Designed with simplicity in mind, homes feature large open spaces and soaring ceilings that give the roughly 3,000-square-foot interiors a voluminous feel. Large communal areas such as the chef’s kitchen and great room lie on the main level and open directly to a deck and outdoor dining patio. An expansive primary suite—one of four bedrooms—sits off the great room and has access to the deck.

Other perks: In addition to a junior suite and guest bedroom, a dedicated bunk room provides additional space for guests and children. The lower level has been configured with a central recreation room that leads out to decking with a spa.

Represented by: Taylor Carlton and JB Benna, Tahoe Mountain Realty


Whitefish, Montana | $2.3 million

The pristine waters of Whitefish Lake bring thousands of adventure-seekers to the area each year for boating, swimming, fishing and other popular lake activities. This modern condominium on the shore has a front-row seat of the action with three levels of decking that face the lakefront.

Features: Tailored for modern living, the four-bedroom, three-bathroom condo features a contemporary aesthetic with wide-plank wood floors, walls of glass and modern fixtures throughout. In the primary suite, the space expands to include a four-piece bathroom, a walk-in closet and a clean-burning bio-ethanol fireplace.

Other perks: An automated whole-house audio/video system makes controlling the lights, shades and entertainment a breeze. Pocketing doors in the main living area erases boundaries between indoor and outdoor spaces.

Represented by: Jeff Raper, National Parks Realty


National Parks Realty, Slifer Smith & Frampton Real Estate and Tahoe Mountain Realty are exclusive members of Forbes Global Properties, a consumer marketplace and membership network of elite brokerages selling the world’s most luxurious homes.

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Here Are The Properties At Stake In The Gates Divorce

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Gates house

Bill and Melinda Gates’ divorce announcement is likely to spark one of the largest divisions of personal assets in history. Bill Gates is presently the world’s fourth-richest person, with a $130.5 billion fortune, stemming from his $25 billion stake in Microsoft, a host of publicly traded investments and a collection of ultra-luxury properties scattered across the U.S. 

The couple’s main home, a $131 million estate nicknamed Xanadu 2.0, spans 66,000 square feet and took seven years to build. It features a trampoline room, six kitchens and an artificial stream. Their other homes include a $43 million beachfront mansion in Del Mar, California and an equestrian estate in Wellington, Florida, which also counts billionaires Jeremy Jacobs, Michael Bloomberg and John Malone as owners. 

Easy to overlook is the huge portfolio of farmland. The couple are the largest private farmland owners in America, with 242,000 acres, according to The Land Report, with the biggest swaths in Louisiana (69,071 acres), Arkansas (47,927 acres) and Nebraska (20,588 acres). It is not presently clear how that land is being used.

They also own four private planes, a vast art collection and the Codex Leicester, a notebook filled with scientific writing by Leonardo da Vinci, which Bill bought for $30.8 million in 1994. 

On some level, it doesn’t matter how the couple plans to divide their assets. Together with Warren Buffett, in 2010 they cofounded the Giving Pledge—a promise by high-net-worth individuals to give away more than half of their wealth—and reportedly plan to leave $10 million to each of their children, devoting the rest to charitable causes.  

Already, they have given more than $35 billion worth of Microsoft stock to the Bill and Melinda Gates Foundation, the world’s largest private charity, which focuses much of its work on public health. Last May, for instance, the foundation said it would earmark $300 million to combat the Covid-19 pandemic. 

Below is a closer look at some of the couple’s real estate holdings. 

Medina, Washington

Located on Lake Washington, the home’s nickname, Xanadu 2.0, drew inspiration from the protagonist’s abode in Citizen Kane. With a reported seven bedrooms and more than 18 bathrooms, the house is designed to be energy efficient while also supporting an underwater sound system, screens powered by miles of fiber-optic cables, and a 2,100 square-foot private library. 

Del Mar, California

This six-bedroom home was designed by Ken Rochetti, and includes tons of deck space, a four-car garage, jacuzzi and glass tile pool. Spanning 5,800 square feet, the $43 million property is a landmark in Del Mar. It was last owned by Madeleine Pickens, who was previously married to billionaire T. Boone Pickens.

Indian Wells, California

The six-bedroom house was purchased in 1999 for $12.5 million and, at 13,000 square feet, is one of the couple’s more modest properties. One main appeal is its proximity to a golf course designed by Tom Fazio. Lee Iacocca reportedly lived nearby. 

Wellington, Florida

The Gates’ daughter Jennifer is well-known in equestrian circles, and there is plenty of space to ride on this 30-acre collection of properties in Wellington. The most recent addition came in 2019, a $21 million horse farm set on 7.7 acres. 

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These Are The 15 Most Popular Home Styles Across the U.S.

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Neutral colored ranch-style home is one of the most popular styles in the U.S.

No matter where you live, you’ll likely encounter a wide variety of architectural home styles just by driving through your neighborhood. From extravagant to quaint, homes across the U.S. hold their own unique beauty and characteristics just like the people who inhabit them.

So, what are the most popular home styles in the U.S.? From New York, NY to Portland, OR, you don’t have to be an architect to appreciate the range of stunning house styles available on the housing market. So whether you’re in the market for a new home or just love browsing homes on your favorite real estate app, check out the 15 most popular home styles in the United States right now.

What Are the Most Popular Home Styles?

1. Ranch-style homes

Dating back to 1932, the ranch-style home grew in popularity during the 1950s and 1960s, and is still popular today. The iconic ranch architecture is known for its simple, single-story floor plan, low-to-the-ground look, often with an open layout and occasional basement. This style of house typically has a smaller yard, attached garage, and a low-pitched roof. The ranch-style home often features large windows and sliding glass doors, encouraging an indoor-outdoor living style. A ranch can also be called a ‘rambler,’ depending on which region in the country you live in and local terminology. 

Looking locally, ranch-style homes currently have the highest sale-to-list ratio in a handful of cities,  meaning this style of house is more likely to sell above the list price. These cities include Portland, OR, Phoenix, AZ, Chicago, IL, San Francisco, CA, and San Diego, CA. Each of these cities favor the rambler, with a current sale-to-list ratio of over 100%.

2. Craftsman-style homes

Two-story red brick colored craftsman home with greenery

The beloved craftsman style home became increasingly popular in the 1900s by architect and furniture designer Gustav Stickley, and has remained popular throughout the 21st century. This staple for American Architecture adds charm to any neighborhood with its exterior features, including shingles, low-pitched roofs, and covered front porches. Craftsman homes also feature recognizable interior details such as thick trim, prominent ceiling beams, and built-in shelving and seating.

Craftsman homes are a desirable home style all across the U.S., but they are often sold above list price in Oakland, CA, Seattle, WA, Atlanta, GA, and Portland, OR.

4. Contemporary-style homes

A two story white contemporary-style home with black garage and trim

Contemporary architecture is often used interchangeably when describing modern style architecture. A wide range of recently built homes are built with Contemporary-style architecture. These homes have inventive designs and simple forms without elaborate ornamentation or detail. They usually have geometric lines, large windows and doors to bring in light, and open floor plans. They often incorporate sustainable and eco-friendly building materials, textures, and components, exposed roof beams, and flat or low-pitched roofs. 

Contemporary-style homes see the highest sale-to-list ratio in Oakland, CA, Denver, CO, Phoenix, AZ, San Francisco, CA, San Diego, CA, Chicago, IL, and Atlanta, GA.

5. Modern-style homes

Single-story modern home with pool is one of the most popular home styles

Emerging in the 1920s to embrace minimalism and reject the more ornate home styles, modern house styles typically include progressive elements such as asymmetrical exteriors, flat roofs, and integrated outdoor spaces. Many modern interiors also feature minimal molding and trim, neutral color palettes, and metal accents.

You’ll find the highest sale-to-list ratio in Denver, CO.

6. Cape Cod-style homes

Single-story white cape-cod home with large lawn and front porch

With roots dating back to 1675, the quaint and charming Cape Cod-style homes are reminiscent of the classic American cottage style. This type of home design migrated from England to the United States, maintaining its symmetrical design and central chimney. Cape Cod-style homes feature a steep roof to keep snow from accumulating, dormer windows for added light, wood siding and shutters to keep the heat in, and hardwood floors for comfort and practicality. 

This style of house is prevalent in the northeastern part of the United States, commonly found in the New England region.

7. Colonial-style homes

Two story, brick colonial style homes with dark blue shutters

Dating back to 1876, East Coast architecture has maintained its allure in many parts of the United States. These classic homes are known for their old-world charm, decorative doorways, and symmetrical window placement. Many colonial-style homes will have two or three stories, fireplaces, and brick or wood exteriors.

Colonial-style homes are similar to the Cape Cod-style home because of their symmetry and side-gabled roofs, but Cape Cod-style homes are typically one story rather than two or three. Colonial-style homes can be found in the northeastern part of the United States.

8. Tudor-style homes

Neutral colored tudor style home with path to the front door

Originating in the 15th century during the reign of the House of Tudor, this style of house is fairly easy to identify with its unique features. Tudor-style homes typically have a combination of brick, stone, or stucco exterior and decorative half-timbering on the second story to create the well-known striped exterior. They also feature a steeply-pitched roof, cross gables, and tall, narrow windows. Today, Tudor-style homes are prominent in the Northeast and Midwest regions of the United States.

9. Cottage-style homes

two story cottage style home painted blue with an arched doorway

Inspired by the medieval styles of the English countryside, American architects designed the cozy cottage-style houses during the 1920s and 30s. This style of house typically has a steep, thatched roof, arched doorways, shuttered windows, and a warm storybook character bringing to life old-world charm.

10. Mediterranean-style homes

Mediterranean style home is mot popular in California and Florida

Mediterranean-style homes are suitable for warmer climates, which is why this style of house became prevalent in Southern California during the 1920s and 1930s. Influenced by the architecture of countries in the Mediterranean region, they often have low-pitched red tile roofs, vaulted ceilings, arched doors and windows, and a stucco or adobe exterior. The floor plan is typically U-shaped, creating a central courtyard for a garden or fountain. Today, this style of house remains popular in California and Florida.

11. Farmhouse-style homes

Two story white farmhouse-style home with a large lawn and black trim

The farmhouse was designed back in the early 1700s, built as housing for farmers and all about practicality. Modern farmhouses still exhibit many of the same features that the original design included, like large, wraparound front porches, clapboard siding, large fireplaces, wood floors, eat-in kitchens, and oversized kitchen sinks. 

12. Mid-Century modern-style homes

Neutral colored mid century modern home with triangle-shaped entry and wood fence

Mid-century modern style is part of the modernism movement and dates back to post-World War II, and remained popular throughout the 1970s. A mid-century modern design is characterized by minimalism, clean lines, and floor-to-ceiling windows. You’ll often see open layouts, and a mix of natural and manufactured materials for the interior elements like wood, stone, steel, and plastic.

Mid-century modern style homes are most popular in Oakland, CA, Denver, CO, San Francisco, CA, and Seattle, WA, with a sale-to-list ratio as high as 131.5% in Oakland.

13. Victorian-style homes

Two-story, pink victorian style home with white trim and round tower

Victorian-style homes were first seen during the Victorian Era from around 1860 to 1900. This house style is best described as a colorful dollhouse with romantic and distinctive features. Victorian-style homes have elaborate detailing in just about every part of the home, from the intricate wood trim, ornate staircases, stained glass, and decorative woodwork. They have steep gabled roofs, a front-facing gable, patterned shingles, bay windows, a round tower, and a front porch.

Victorian-style homes remain popular in Boston, MA and San Francisco, CA, with a sale-to-list ratio of 98.5% and 101.1%, respectively. 

15. Townhouse

four story brick townhouse

Originating in Europe and eventually migrating to the United States, townhomes are most commonly found across cities in the United States. With the convenience of spacious layouts, townhomes offer more amenities than the condo styles and are lower maintenance than most residential homes. They’re typically two or three-story homes, usually sharing one or two walls with adjacent properties, and a rooftop deck to enjoy sprawling views.

Home styles with the highest sale-to-list ratio in the largest 12 US metros:

Metro Home Style Sale-to-list ratio % active listings
Phoenix, AZ Ranch 102.3% 4.0%
Contemporary 101.8% 2.0%
Atlanta, GA Craftsman 100% 1.9%
Ranch 99.9% 2.0%
New Construction 101.9% 3.0%
Portland, OR Ranch 105.4% 2.2%
New Construction 103.5% 11.2%
Craftsman 101.5% 2.0%
Oakland, CA Mid Century Modern 131.5% 1.2%
Craftsman 128.4% 2.2%
Contemporary 112.5% 4.4%
Boston, MA Victorian 98.5% 1.0%
Craftsman 99.1% 1.0%
Penthouse Unit 103.3% 1.0%
Chicago, IL Raised Ranch/Ranch 100.2% 1.0%
Contemporary 99.1% 1.3%
Elevator Building 99.0% 1.0%
Denver, CO Contemporary 101.5% 7.9%
Mid Century Modern 105.1% 1.0%
Modern Architecture 103% 1.1%
San Francisco, CA Mid Century Modern 122.8% 1.0%
Contemporary 102.6% 6.5%
Ranch 104.7% 2.4%
Seattle, WA Mid Century Modern 110.9% 1.0%
Craftsman 108% 3.9%
New Construction 105.4% 28.0%
San Diego, CA Ranch 102.5% 2.3%
Contemporary 100.7% 3.3%
New Construction 101.2.% 1.2%

 

*Per home trends listing data on Redfin.com, as of May 2021 

Individual results may vary. This is not intended as a substitute for the services of a licensed real estate agent, or licensed and bonded home services professional or appraiser.

 

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