Mortgage Delinquencies Rise Alongside Natural Disasters
Buying a home has traditionally meant long-term financial security, but that promise is eroding as rising property taxes and insurance costs are increasing the cost of homeownership. According to a recent report from property data firm Cotality, the number of mortgage delinquencies is increasing, especially in states prone to natural disasters where taxes and insurance costs are climbing faster than many homeowners can manage.
States experiencing the most extreme weather events are seeing more delinquent loans
Serious mortgage delinquencies had been steadily declining for more than three years until mid-2024, when the trend reversed. While many states saw only modest increases, the situation is more severe in places where natural disasters are becoming more frequent. States such as Florida, South Carolina, and Georgia are seeing a sharp rise in delinquencies, driven in part by the growing natural disasters that have pushed insurance costs higher.
For instance, over the past five years in Florida, property taxes have increased by nearly 50%, and insurance premiums are also climbing rapidly in parts of the state that are vulnerable to hurricanes and flooding. Because of these cost increases, the average escrow payment in Florida—which covers taxes and insurance—has jumped by 62% in the past five years.
Likewise, in Georgia, property taxes increased by more than $700 on average in the past five years. While home costs in the state used to be below the national average, that gap is narrowing fast. Costs rose by 65% between 2019 and 2024.
Homeowners with government-backed loans are being hit the hardest
Mortgage loans backed by the government—such as those from the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA)—are designed to make homeownership more attainable for people with lower incomes or limited savings.
However, these types of loans also leave less financial wiggle room, so when escrow payments go up, borrowers with FHA or VA loans are often hit the hardest.
According to the report, serious delinquency rates for FHA loans are five times higher than those for conventional mortgages, while delinquency rates for those with VA loans are three and a half times higher than conventional mortgages.
More on how insurance and property taxes are changing the way buyers look at housing costs
- Increased Property Taxes Are Driving Up Housing Costs: Since 2019, property taxes have risen by more than 27%.
- Homeowners Insurance: The Other Affordability Crisis: Nationwide, home insurance costs have spiked nearly 20% over the past two years, and more increases are expected.