Jason Haber, co-founder of the American Real Estate Association, explains the state of the housing market and assesses Redfin’s announcement of a “major housing reset” in 2026 on “The Claman Countdown.”
Rising security deposits are hurting U.S. budgets and creating an even bigger barrier for people trying to enter the housing market this year, according to a new report.
These escrow payments, the portion of a monthly mortgage that goes toward property taxes and homeowners insurance, are considered one of the biggest risks to the U.S. housing market in the new year, threatening market participation, according to the Cotality 2026 analysis of real estate market trends.
The analysis closely examines how these payments, which are already affecting current homeowners, will continue to rise in the new year.
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By 2025, non-mortgage costs, which are essentially expenses necessary to own a home but are not part of the loan and are collected and paid by the lender, increased by 30%. However, some states, especially those where natural disasters are more common, faced steeper increases in costs.
A compass sign outside a home for sale in Sacramento, California, on Wednesday, April 24, 2024. (David Paul Morris/Bloomberg via Getty Images/Getty Images)
In Florida and Colorado, for example, bail payments will increase by 55% and 57%, respectively, by 2025, according to Cotality’s analysis. Insurance premiums in those states were the main driver of the escrow spike.
Cotality predicts things will only worsen as insurance premiums rise 8% nationwide by 2026, faster than inflation.
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These costs could deter more buyers from entering the housing market, ultimately affecting their ability to achieve homeownership, said Archana Pradhan, chief economist at Cotality.
It comes as a growing number of potential buyers have been locked out of the market in recent years due to higher borrowing costs and higher house prices.
A for sale sign is shown outside a home for sale in Los Angeles, California on August 16, 2024. (PATRICK T. FALLON/AFP via Getty Images/Getty Images)
“Normally, just having a fixed-rate mortgage keeps homeowners’ payments from fluctuating too much. But that certainty of stable monthly payments is under threat,” he said. “Between rising insurance premiums and property taxes, the cost of homeownership for millions of people is far from certain.”
Two things are happening at the same time, making home ownership seem out of reach. Not only do these costs eat into household savings, but the uncertainty about taxes and insurance makes it harder for families to budget, Krimmel said.
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Combined, these “trends are beginning to undermine the financial stability that homeowners have long taken for granted.”
On July 31, 2019, newly constructed single-family homes are listed for sale in Encinitas, California. (Reuters/Mike Blake/Reuters)
Krimmel also warned that the increase in escrow payments is not only an indication of homeowners paying more in property insurance, but also an indication of an increased risk of natural disasters such as floods or wildfires, which poses “real risks in the future” for homeowners.
Snapshot of a mortgage-related escrow payment: PNC
- Property taxes
- Homeowners insurance premiums
- Any required flood insurance
- Any required mortgage insurance (such as private mortgage insurance (PMI) for conventional loans or mortgage insurance premiums (MIP) for FHA loans)
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Escrow payments do not include:
- Any contribution from the Owners’ Association (VvE).
- Utilities (water, sewer, garbage, electricity, cable, telephone or internet)
- Maintenance or repair costs of your home.
