Quickly rising escrows in the 10 states where property taxes and homeowners insurance are rising the fastest have led to a surge in mortgage delinquencies, according to a new report from Cotality.
The report noted that since 2019, escrow payments have risen 77% and 70% in Colorado and Florida, respectively, with other states showing lesser – but still sharp – increases.
The rest of the top 10 states showing the largest increases were Wyoming (up 66%); South Dakota (up 65%); Montana (up 64%); Louisiana (up 63%); Alabama (up 62%); Georgia (up 58%); North Carolina (up 56%), and Indiana (up 56%).
Nationwide, people are paying an average of 45% more in escrow costs compared with five years ago.
Property Tax Bills Are Up
Insurance costs have risen sharply across the country as companies raise rates to recover costs from disasters such as last year’s California wildfires, hurricanes and other weather events. Property taxes have risen spiked in Illinois and many other states due to a combination of rising assessments and increasing home values.
According to Coality, property tax bills are 15.4% more than just before the pandemic. In states such as Wyoming, South Dakota, and Kansas where Cotality data shows home prices have spiked by double digits since 2019, the increase is even more.
“Property taxes have really escalated in Florida due to a rapid increase in property values over the last few years from the [COVID-19] pandemic real estate boom, when you had homes doubling and tripling in value in many cases,” Cara Ameer, a Florida real estate agent with Coldwell Banker, said in a recent Realtor.com interview.
“Rising escrow costs are a growing financial burden for both new and existing homeowners,” Archana Pradhan, principal economist for Cotality, said in a prepared statement. “This financial strain can deter many from entering the housing market, ultimately affecting their ability to achieve homeownership. At the same time, existing homeowners are getting squeezed, especially those who are on fixed incomes or tight budgets.”
Escrow Can Make Up Large Part of Monthly Payment
In some states, escrow can make up roughly the mid-40% range of the total monthly payment, noted Tyler Bliha, CEO and founder of Abode Money. “When that much of your payment is taxes and insurance, even a ‘normal’ increase hits hard.”
“Rising property taxes and homeowners’ insurance premiums are driving escrow payments higher and eroding the predictability borrowers expect from fixed rate mortgages,” added Sandeep Shivam, Tavant Product Leader. “Lenders need technology that anticipates these step changes, not systems that simply react after the payment shock hits. AI driven risk models can combine tax assessment trends, insurance renewal signals, and climate risk indicators to identify borrowers likely to see material escrow increases. If servicing platforms ingest real time insurance market data, lenders can detect early movement toward higher DTI, notify borrowers in advance, and offer planning tools or mitigation options. Proactive digital engagement protects borrowers, reduces delinquency risk, and strengthens long term customer retention.”
