Owning Manhattan Star Agent Ryan Serhant Reveals What He Sees As The Biggest Threat To The Real Estate Industry

Ryan Serhant is the star of the Netflix real estate reality show "Owning Manhattan," a role he earned on the strength of a successful real estate career. He has done millions of dollars' worth of transactions in his career and he knows this business. So, when a real estate professional of his caliber says he's worried that rising insurance rates could threaten the entire industry, it's a warning worth listening to. 

If you were to imagine the entire real estate industry as a machine, think of insurance as the lubricant that allows the machine's gears to turn smoothly. Without insurance, the machine would come to a screeching halt. Banks couldn't finance properties for 15 or 30 years and buyers wouldn't feel secure committing the capital necessary to pay for a piece of real estate.

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That's because the risk of natural and human-made disasters is too high for the real estate industry to function without some form of risk mitigation, which is insurance. Insurance becomes even more important as property values rise; historically, that's exactly what they do. Insurance premiums increase with property values, but disaster risk should remain steady theoretically. 

Climate change increasingly throws a wild card into that equation, which is why Serhant is so concerned. As the frequency and intensity of natural disasters grow, insurance companies have no other way to manage their risk besides raising premiums. If the premiums get too high, it eats into buying power and hurts consumer confidence. The long-term effect on the real estate market could be devastating.

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 Serhant discussed the issue in an interview with the Daily Mail, where he said, "It’s one of the greatest insurance crises that we’ll see, I think, in a very, very long time. What’s frightening to me is that only two to four percent of homeowners have flood insurance." Many are surprised that standard home insurance policies do not include flood insurance. 

People who want flood insurance (or are forced to carry it by their insurer) usually purchase a separate policy from a federal government-insured program. Serhant told the talk show Varney and Co., "If you get it (flood insurance) through the National Flood Insurance Program, it’s $1,000 a year on top of all of your other costs. So, it’s a travesty." 

All those costs add up for policyholders and insurance companies. Many major insurers are exiting major markets like Florida and California due to the cost of covering disaster-related claims and lawsuits from angry policyholders. A recent report from insurance data firm Insurify shows the average premium in America has increased 20% in the last two years and predicts it will increase another 6% by the end of 2024. 

The future is incredibly grim in Florida, where the average premium is expected to be $11,759 by the end of 2024. Those are by far the nation's highest premiums and it's worth noting the year-end predictions were made before Hurricane Milton slammed into Florida. Serhant fears that the current situation in Florida could be a preview of the future. If he's right, the real estate industry could be unrecognizable in a few decades.

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