I thought insurance rates were also rising because of increased rates of natural disasters, but this just adds more pressure to it.

The rate of natural disasters isn’t going up, the cost of natural disasters going up. It is because they are affecting more densely populated areas. And the structures that are damaged cost more to fix/replace.

E.g., https://www.nhc.noaa.gov/pastdec.shtml

If i insure my house for 200k, i get 200k whether it costs 200k or 400k to rebuild it.

My home insurance has doubled from 2022 to 2024 for the same level of insurance. And the value of my house crrtainly hasn’t doubled. I expect some increase year to year but that is excessive.

Inflation is expected but a lot of companies are also taking advantage of the rise in prices and using excuses that no longer apply.

Companies aren’t willingly going to go back to reasonable prices if people are still willing to pay higher ones or if customers are locked in.

Check out Pepsis earnings call a few quarters back. Basically “we raised prices bc we can and our margins have increased”. Its just capitalism. Supply chain shock is over.

I don't get the impression that natural disasters are becoming more frequent, necessarily, or even more severe. But rebuilding is becoming much more expensive, for the same reasons it's become so expensive to build anything in the first place.

Southern coast has seen an excessive amount of hurricane damage over the past five years. Check florida and gulf coast state insurance rates recently.

Again, the point is that you can't just compare $X billion over the past N years with $Y billion during a different N-year period. The numbers have gone up dramatically even if the actual damage didn't.

I thought most house price inflation was about land values? If it was just build costs wouldn’t we see more starter, smaller homes

It can be more than one thing, and no that does not necessarily follow, e.g. a smaller set of larger homes may be most efficient for a development company in terms of cost and potential revenue, regardless of whether or not material cost rises. Especially if costs of hookups, basements, licenses, etc. are non-trivial.

Land values play a major factor in home values, but there are other factors that could lead to the increased cost of building homes, such as the price of raw materials and the price of labor. Higher interest rates are also having an impact, since it costs more to borrow money.

There are of course many factors, but the largest driver of cost increases in recent years have been materials and contractor profits. There aren't enough contractors and they can name their price. Unfortunately labor isn't really part of the cost driver, and basic laborers like carpenters are still under-paid compared to the wages that would attract people to the trade. Basically the American economy is now rigged to direct all earnings to middlemen and "thought workers" so nobody wants to just swing a hammer.

I often think about it like this - what job would you prefer for your child - work on building a road, or be a lawyer arguing whether or not that road should get built?

>If it was just build costs wouldn’t we see more starter, smaller homes

Sort of. Smaller homes also use less land, so it doesn't really matter which it is; you'd see more smaller homes either way.

But zoning forces lots of land per house (with required house and lawn minimums), which squeezes land supply. So yes, it's land values, but only as a symptom of the core zoning issues.