For the first time since 2010, homes with low natural disaster risk are appreciating in value at a faster rate than those with high risk across three major climate categories: heat, fire, and flood. This shift suggests that Americans are increasingly factoring in natural disaster risks when making housing decisions. Despite this trend, high-risk homes have still seen significant value increases since the pandemic.
Key Findings
Value Growth Comparison:
- Homes with low risk of extreme heat have increased in value by 7% year-over-year, totaling $17.7 trillion.
- In contrast, homes at high risk for extreme heat have risen 6.3% to $29.7 trillion.
- Low flood risk homes appreciated 6.7% to $40.2 trillion, while high flood risk homes grew 6% to $7.2 trillion.
- Low fire risk homes saw a 6.6% increase to $39 trillion, compared to a 6.4% rise for high fire risk homes at $8.4 trillion.
These incremental differences are significant, marking a notable trend in the housing market as low-risk homes have consistently outperformed high-risk homes since February 2024.
Expert Insights
Elijah de la Campa, a Senior Economist at Redfin, emphasized the broader implications of this trend: “The fact that this is happening across risk types—and thus, across the country—is some of the best evidence we have that climate change is impacting people’s homebuying decisions.” As climate-related disasters become more frequent, many buyers are prioritizing safety over affordability. Rising insurance costs in high-risk areas are further deterring potential buyers, making these regions less attractive.
Changing Living Preferences
Recent data indicates a shift in where Americans choose to live, with areas in California that are high-risk for fires experiencing a net loss of residents last year. Additionally, a survey conducted by Redfin and Ipsos found that nearly one-third of young adults reconsidered their living situations after experiencing Hurricane Helene.
The slower growth in home values in disaster-prone states like Florida and Texas can be attributed to both the inherent risks of living in these areas and the rising costs of insurance and property taxes, which have dampened demand. Moreover, the construction boom in these states has added to the housing supply, further limiting price increases.
Long-Term Trends
Despite the recent trend favoring low-risk homes, the overall value of high-risk properties remains substantially higher than pre-pandemic levels:
Homes at high risk for extreme heat increased by 62.5% since before the pandemic, while low-risk homes rose by 53.2%.
High flood risk properties are up 60.3%, compared to 58.7% for low flood risk.
High fire risk homes have appreciated by 67.8%, while low fire risk homes increased by 57.2%.
The pandemic-driven homebuying surge, fueled by low mortgage rates, has kept demand high in many disaster-prone regions, contributing to ongoing value increases.
Conclusion
While climate risk is becoming a critical factor for many homebuyers, it has not completely deterred interest in high-risk areas. The ongoing demand for homes in these regions, combined with a nationwide shortage of available properties due to the mortgage rate lock-in effect, continues to drive up values across the board.
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