Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating Home Insurance Costs
Transcript
- Lucas: If walking through the economy with us has made something click about how your paycheck stacks up against the things you actually spend money on, then today's episode is going to feel like a small victory lap. Because for the first time in years, homeowners insurance — one of those big, unavoidable costs — is finally growing slower than your raise. Luna: Wait, say that again. Homeowners insurance premiums have been absolutely brutal. I've heard stories of people seeing twenty, thirty percent increases year after year. Are we saying that's over? Lucas: Not over, but the trend has definitely shifted. Let me give you the numbers. The latest CPI data from June 2026, which came out yesterday — July 14th — shows overall inflation at 3.5 percent year-over-year, a bit below expectations. And within that, the homeowners insurance index rose just 2.8 percent over the same period. That's the smallest annual increase since early 2021. Luna: Okay, so that's the headline. But what's actually driving it down? Because two years ago, insurers were fleeing states like Florida and California, and premiums were shooting up. Lucas: Exactly, and that's the key context. The moderation comes from a few things lining up. First, catastrophe losses were relatively mild in the first half of 2026. No major hurricane hit the U.S. mainland, and the wildfire season in California was less destructive than the previous two years. That takes pressure off the reinsurance market, which then flows down to your premium. Luna: So basically, we got lucky with the weather this year. That doesn't feel like a long-term fix. Lucas: You're right to be skeptical. But there's also structural change happening. A wave of insurtech startups — companies like Lemonade, Hippo, and some newer entrants — have been aggressively writing policies in states where legacy carriers pulled back. They're using AI for underwriting and claims processing, which lowers their cost base. That competition is putting downward pressure on premiums. Luna: And regulators have been pushing back too. I remember California's insurance commissioner froze some rate increases last year, demanding more transparency on catastrophe models. That's probably having an effect. Lucas: Absolutely. Between competitive pressure and regulatory scrutiny, insurers can't just pass through every cost increase the way they did in 2022 and 2023. But here's where I want to zoom in on something that I think is really important for our listeners: even with this moderation, homeowners insurance is still eating up a bigger share of the average paycheck than it did five years ago. So the fact that it's growing slower than wages now doesn't mean it's cheap. It means the bleeding has stopped. Luna: Right. And that's the whole point of this series, isn't it? We've been tracking the moment when wage growth finally overtakes specific costs. For homeowners insurance, that moment seems to have arrived. But we need to be honest about the variation. Lucas: Exactly. If you live in Florida, your premium is still up maybe 8 to 10 percent this year. In Texas, hail losses have kept rates elevated. So the national average masks a lot of pain. But on a national level, your raise is winning. And that's a data point worth knowing. Luna: I think that's a really empowering way to frame it. And it ties into something we've talked about before: the importance of shopping around. If the market is getting more competitive, you might actually save money by switching insurers. Lucas: That's a great point. And look, if today was actually useful to you — if understanding how homeowners insurance fits into the bigger wage versus price picture helps you think about your own budget — then the way this show stays ad-free is listener support. You can buy me a coffee at buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash fexingo. No pressure, just if you find value in what we do. Luna: It's such a small gesture, but it really does keep the lights on. And we genuinely appreciate every single one. Lucas: Okay, back to the economics. So we've established that nationally, homeowners insurance is growing slower than wages. But I want to talk about what this means for renters, because the CPI also tracks renters insurance — and that index actually fell 0.3 percent in June. That's a different story. Luna: Interesting. So if you're a renter, you're actually seeing a slight decline in that cost. But renters insurance is a much smaller expense, so the impact on your overall budget is minimal. Lucas: Right. The median annual premium for renters insurance is around $200, versus $1,400 for homeowners. So a 0.3 percent drop is like six bucks. But the psychological effect matters — it's another small win. And cumulatively, these small wins across different categories start to add up to real purchasing power gains. Luna: That's the macro story that doesn't always get told. Headlines focus on the overall inflation number, but the granular picture of which costs are falling relative to wages — that's what determines whether people feel better off. Lucas: Exactly. And when you look at the wage data, average hourly earnings for private workers hit $37.60 in June, up from $37.51 in May. That's about a 2.4 percent annualized growth rate in the last few months. Core CPI, excluding food and energy, actually declined slightly month over month. So real wages — adjusted for inflation — are rising. Luna: And the employment cost index for wages, which is a broader measure including benefits, was up to 177.5 in the first quarter. That's a 0.7 percent quarter-over-quarter increase, annualizing to about 2.8 percent. So consistent with the story. Lucas: So here's the big picture. Homeowners insurance is the latest category to cross the threshold where wage growth is exceeding price growth. It joins rent, health insurance, car insurance, and a bunch of others we've covered. For listeners who own a home, the practical takeaway is: now is a good time to review your policy and see if you can lock in a better rate. For renters, you're already in a pretty good spot. Luna: And for everyone, the broader lesson is that the inflation crisis of 2021-2023 is fading into a more normal environment where your paycheck gradually regains ground. It's not a boom, but it's progress. Lucas: Progress we should acknowledge. I'm Lucas. Luna: And I'm Luna. Thanks for listening, and we'll see you next time.