Published June 27, 2012
Scott Ryles is offering insurance to protect whatever value you may have left in your home.
He is chief executive of Home Value Protection Inc., a new company hawking this new form of insurance.
I caught up with Mr. Ryles at the National Association of Real Estate Editors' conference last week, where he offered a gloomy housing market forecast.
It's funny. You talk to a guy who sells houses for a living and you might hear about how there's never been a better time to buy a home. You talk to a guy who sells home value insurance and you'll hear a lot of reasons why the market may have a lot farther to fall.
"We don't think we can predict home prices," Mr. Ryles told me after his presentation. "The question is, can you afford to be trapped in your home?"
Mr. Ryles's company offers a way out with policies that run for up to 10 years. It's a bet for those who know they will have to move within 10 years, or at least see moving as a possibility.
"Half of all moves are unplanned," he said. "Death, disability and divorce."
Policies cost about $25 a month for every $100,000 worth of home value. They pay when a homeowner a) sells, b) realizes a loss, and c) the oft-cited Case-Shiller home index is down in their geographic area. (For other details see www.homevalueprotection.com.)
"This is not about money," Mr. Ryles said. "Your home is the means by which you finance your next home, or an education or your end-of-life care."
So far, Home Value Protection is the only company that protects this nest egg. The company was founded in 2009 but did not start writing policies until October. Since then, it has only written policies on about $50 million worth of home value, Mr. Ryles said, and it has only rolled out its coverage in Arizona, Georgia, Indiana, Oklahoma and Ohio. It hopes to roll out nationwide, but must seek regulatory approval state by state.
The company is so new it has yet to pay a claim. But Mr. Ryles is looking forward to paying one soon. "If we don't pay losses, no one is going to pay for our product," he said.
Mr. Ryles is a former Merrill Lynch investment banker who was recruited to work for Kleiner Perkins Caufield & Byers in 1999. The venture firm and its investors are financing Home Value Protection. It will be interesting to watch this idea evolve as Europe collapses and the U.S. economic recovery stalls.
Does Kleiner Perkins really believe it has pegged the bottom of the housing market? Or is it like the Geico Gecko, who has a pretty good handle on the number of insured cars that will crash, and collects premiums accordingly?
"The best case for us is volatility," Mr. Ryles said, "which is what we think is the most likely scenario."
Funny how he comes up with this now that our home value is gone. A recent report from the Federal Reserve showed U.S. households lost nearly 40% of their net worth between 2007 and 2010. And other reports show about 30% of Americans with mortgages owe more on their homes than they are worth. Can it really get any worse?
Nobody imagined the need for insuring home values in the boom. And nobody wanted to do it just after the bust. So maybe we are in between extremes. "Two years ago, people were scared to death to try this," Mr. Ryles said. "And now, if we do well, we're going to have competition."
For now, Mr. Ryles said his phones are ringing: "The most common call we get is, 'Will you insure my house for what it was worth in 2006?' And we say, 'No.' And that's usually followed by, 'Click!'"
(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. Contact Al at firstname.lastname@example.org or tellittoal.com)