RISMEDIA, September 11, 2009—A dramatically changing housing market dominated by first-time buyers, tightened financial lending requirements and higher down payments is intensifying consumer demand for home warranties, according to the Home Warranty Association of California (HWAC). Stewart E. Miller, a member of HWAC Board of Directors, reports that the association anticipates that the large majority of home buyers in the near term will continue to be first-time buyers or investors at the lower priced segment of the market. “With new lending requirements, including higher down payments, many buyers may be strapped for cash. However, with a home warranty in place, new home owners who might otherwise pay for appliance and system repairs out of their own pockets will find those costs transferred to a third party home warranty company,” Miller said. Miller added that home warranties are taking on even more importance as so many properties today are exempt from seller’s disclosure statements because they are bank-owned and have been vacant for some time.
“Since there is no disclosure on these homes for sale, many are purchased somewhat blindly and the buyer may have limited knowledge of the conditions of systems and appliances covered by a home warranty contract. Home warranties cover normal wear and tear of home appliances and systems during the first year of ownership, but pre-existing conditions are not covered,” Miller noted.
He emphasized, however, that many banks now recognize the value of home warranties in this housing market environment and are increasingly providing home warranties as a major concession in order to move homes.
“Another factor sparking home warranty interest in today’s restrictive financing market is the rising cost of home appliances, notably hot water heaters and HVAC systems. Five years ago, a 40 gallon water heater cost about $250. Today, that same unit costs $450 to $500. Plus, there are more high-end appliances in homes today. So, without a home warranty, out of pocket expenses can increase,” Miller stated.
Miller concluded by noting that as long as loans are available primarily for lower-priced homes, home warranties will be in high demand as a means of reigning in home owner expenses.
Typically, a home warranty covers a home’s major operating systems and appliances against breakdowns due to normal wear and tear for one year after the close of sale. Items covered include plumbing, heating and electrical systems, most built-in appliances, and water heaters. In recent years, most HWAC member companies have provided additional coverage for plan holders for such items as garage door openers, washer/dryers, refrigerators, swimming pool/spa, roof, and miscellaneous upgrade coverages.