Water Damage From Faulty Pipes a Rising Threat to U.S. Homes

Homes are increasingly flooding, not from weather-related events but from old pipes and valves, worn-out hoses on second-story washing machines, and faulty connections from appliances that use water, The Wall Street Journal reports.

The uptick has sparked an increase in extensive water damage to homes that has been reported to insurers. One in 50 homeowners filed a water damage claim each year between 2013 and 2017, according to Verisk Analytics’ ISO insurance analytics unit. Insurers have faced a $13 billion water damage bill from insuring homes.

Claims for water damage average about $10,000, according to the report.

“Wildfires, hurricanes, and tornadoes catch headlines, but the reality is that the number one kind of risk that the everyday consumer has is a water claim,” Jon-Michael Kowall, an executive at USAA in the property insurance business, told WSJ. “It is lurking in the house.”

Contributing to the rising risk, more homeowners are putting their laundry room upstairs. Leaks and water damage from these upper units can cause extensive damage as they move from the upper floors to the lower ones. Also, the rising number of aging homes with old pipes is causing damage to many homes.

Luxury homes aren’t immune to water damage from old or faulty pipes. An oceanfront property in Southern California had a 12-foot seawall around it to protect it from outside flooding, but a second-story toilet tank crack caused more than $1 million in water damages. The repairs—to the home’s oak floors, walls, artwork, home theater, and more—also took more than eight months to complete.

In a pilot program, USAA is having 6,000 policyholders test water-detecting sensors, which are devices to help spot potential water damage before it becomes more extensive. Also, AIG and some other insurers are offering premium credits for policyholders who use technology that can help detect water leaks.

Homeowners must realize that not every water damage bill will necessarily be covered by insurance. For example, standard homeowner policies exclude storm surges and river flooding from coverage. Also, most homeowners’ policies will cover “sudden and accidental” damage but not routine maintenance. As such, homeowners who have ignored a slow leak for months may find insurance denies their claim.

SOURCE: DAILY REAL ESTATE NEWS

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‘Bank of Mom and Dad’ Could Rank High as Mortgage Lender

Parents are increasingly helping their adult children buy their first home. In fact, a new study suggests that if families were considered a financial institution, the “Bank of Mom and Dad” would be the seventh largest mortgage lender in the country.

Parents and grandparents supported the nationwide purchase of $317 billion worth of property—1.2 million homes—last year, according to a newly released study from the Legal & General Group, a multinational financial services institution.

One in five of buyers received gifts or interest-free loans from family members, the study shows. The average amount buyers received from them was $39,000. The Pacific region saw the greatest share of young adults receiving financial help in buying; the Rocky Mountain region saw the lowest.

More than half—51 percent—of prospective home buyers under the age of 35 say they expect to have help from their family or friends when buying a home. And young adults who already have purchased a home say that without the gift from the “Bank of Mom and Dad,” they would have had to delay their home purchase for at least three years.

“For many, perhaps most,young adults, buying a house without help is an increasingly unattainable goal,” says Nigel Wilson, chief executive at Legal & General Group. But Wilson calls it a worrisome trend that so many young adults are relying on help from family and friends to buy a home.

For example, family and friends who provide financial assistance may be putting their own finances in jeopardy to do so. For example, they reported taking out a loan (15 percent), raiding their 401(k) savings (8 percent), downsizing their own home (6 percent), or coming out of retirement (3 percent), the study showed. The study authors warn that too many of the younger generation may be dependent on their parents and grandparents to buy a home, even if it comes at a financial strain to the gift giver.

The Bank of Mom and Dad “reflects, first and foremost, a housing market where significant problems remain in matching the supply and demand of different types of housing, most notably starter homes and affordable housing of all kinds,” Wilson says. “As the population changes and the millennial generation strives to join the homeowning democracy, new thinking is due on meeting the needs and aspirations of Americans.”

SOURCE: DAILY REAL ESTATE NEWS

Any questions or comments, feel free to contact James Y. Kuang at (626) 371-5662 or by email: james.kuang@coldwellbanker.com    

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