Drastic weather events such as forest fires, floods, extreme heat, drought and storms are taking place worldwide due to Climate change. As a result, all of these climate-related events pose an increasing risk to the real estate and housing market here in the US.
So, if you are a homeowner, or if you are planning to buy or sell a home in the future, it is worth considering the impact these extreme weather conditions can have on your home and its long-term value. Knowing this important information can help you make a more informed decision about how to proceed and what steps you should take to protect your most valuable asset – your home.
How is climate change for now Effects on the housing market?
Awareness of climate change among home buyers is growing, and many Americans are considering climate change in their decisions about where to live. In one recently Redfin poll, almost half of those surveyed who would like to move in the next year said that extreme temperatures and / or the increasing frequency or intensity of natural disasters played a role in their decision to move.
For those who already own a home, they also need to consider how climate change is affecting their property values. Other Redfin poll found that one in five Americans (21%) believe that the increasing frequency or intensity of natural disasters, extreme temperatures, and / or rising sea levels are affecting housing values in their area.
While home buyers and sellers are aware of the risks of climate change and are thinking about how those risks could affect their homes, those ideas have not yet translated into major changes in buying habits or house prices. In fact, some of America's disaster prone areas are actually becoming too more populous when new residents move in, keeping property prices constant, if not increasing. This influx of new residents may be due to the relative affordability of homes in these higher risk areas.
"Home buyers are concerned about climate change, but it's not their main concern," said Redfin chief economist Daryl good weather. “People have to compromise when buying a home to stay on budget. Since there is already a lack of affordable housing, many house buyers have no choice but to accept life in a place where climate disasters are becoming more and more common. "
What effects does the forest fire risk have on the property value?
Larger and more devastating forest fires have ravaged the United States in recent years. In 2020, Forest fires burned 10.1 million hectares, which has been the second most frequent surface in a year since at least 1983. The western United States is particularly vulnerable to forest fires, with California, Texas, Colorado, and Arizona tending to have more forest fires than other states. This is mainly due to their dry climate and hot weather.
As the frequency and intensity of forest fires increases, so does the risk for neighboring houses and their respective property values. According to a Red fin study, Houses in Postal codes with a high risk of forest fire All of California, Oregon, and Washington sold 3.9% fewer sales on average in 2020 than low-risk zip codes. As fires continue to grow more frequent and devastating, fewer buyers may live in high risk areas.
In contrast, the average selling price of houses is in areas with low forest fire risk increased by 101% since 2012, compared to an 88% increase for houses in zip codes with high forest fire risk. This discrepancy exacerbates the affordability crisis in areas with low forest fire risk, leading to lower-budget home buyers buying cheaper homes in fire-prone regions.
However, this trend is not uniform across the country. Utah, for example, where a larger proportion of houses are facing high Forest fire hazard is the fastest growing state in America than any other western state. And for the past 5 years they have middle home price has increased by 84%.
In California, where $ 628 billion worth of homes are facing major challenges Fire hazard, Redfin Real Estate Agent Christopher Anderson said some buyers begin to rethink their choices as the fire season worsens. However, once the fire season ends, much of that fear disappears. He's seen many people leave the area when forest fires break out, but they are always being replaced by new people willing to take the risk.
What effects does the flood risk have on the property value?
Floods are a climatic event that can terrify many property owners, and for good reason. In fact, the state of Louisiana is currently experiencing this fear firsthand. On August 29, the 16th anniversary of Hurricane Katrina, Hurricane Ida hit the city of New Orleans. The storm caused massive flooding, power outages and destruction across the city. Remnants of the hurricane are now moving up the northeast, causing flash floods in New York and New Jersey.
As of 2021, there will already be more than 23.7 million properties in the portfolio Flood risk and 1.7 million more properties will be at risk in just 30 years. While the risks are high, they don't scare off buyers. In fact, residential values tend to be higher in high-risk areas than in low-risk residential areas. Since 2013, Houses with a high risk of flooding sold on average about 7% more than houses with a low flood risk. This is likely due to the lure of luxury waterfront properties, a demand that only increased with the pandemic and the ability to work remotely.
Naturally, Flood risk is increased if you buy a home on the coast or near a large body of water (rivers and lakes), but even if you do not have a view of the beach, your home can still be at high risk Flood zone. Some of the most devastating flooding events occur due to heavy rainfall that can occur anywhere in the United States.
As a buyer or homeowner, it is important to understand the additional costs and risks associated with real estate in areas of high flood risk. For example, home insurance typically doesn't cover flood damage and you may need separate ones Flood insurance. It is important that you get excellent flood insurance and take preventative measures to protect your home from potential flooding. on Redfin.com You can see an area's flood risk, how much property damage the flood caused over the year, and the estimated flood insurance rate. For example in Cape Coral, Florida, 86% of homes are at risk of flooding, and flood insurance premiums range from $ 225 to $ 2,500 per month.
What effects does the heat risk have on the property value?
Heat risk estimates how much climate change could increase the typical number of hot days in a year and the likelihood of extreme heat and heat waves. Heat waves occur across America, but the western and southern states are usually hardest hit. In addition, the effects of heat waves are often felt more strongly in densely populated metropolitan areas such as large cities. Buildings and asphalt absorb and radiate heat much more strongly than plants and trees, which makes urban areas particularly dangerous.
Nonetheless, there is growing interest in warm and relatively affordable areas, especially in the suburbs of large cities. As a result, this increase in demand is driving up property values. For example, Phoenix, AZThat maintains a very high heat risk was that Number one US migration target in the second quarter of 2021; and in the last 5 years the average house sale price has increased by 83%.
So far, real estate values in most areas with a high heat risk have not yet been significantly affected by climate change. However, there is a certain reluctance to begin with home buyers. In one recently Red fin study, 75% of respondents said that extreme temperatures in an area would make them reluctant to buy a home there, which could affect future property values as people move away from high-risk locations.
What effects does the drought risk have on property value?
Droughts have been around for a long time in the western United States, but prolonged dry seasons, extreme heat waves, and declines in rainfall caused by climate change are compounding these droughts. In mid-July more than 95% the west was in a drought.
While droughts aren't as severe as other weather events like hurricanes or forest fires, they can be incredibly damaging. The most common and drought-related property risk is damage to the foundation. When dry soil shrinks, it creates gaps under your foundation that can cause cracks and other problems. Foundation damage can negatively affect the value of your property, so it is important that you take the proper precautions to reduce the likelihood of serious structural damage.
In addition to property damage, droughts can pose a major threat to communities that depend on the city's water sources. In times of extreme drought, communities are often advised to ration water. For example, in 2021, Californians were asked to Reduce water consumption by 15%, and previously in 2015 instructed reduce consumption nationwide by an average of 25%.
But even in view of the high risk of drought, real estate prices do not yet have to be negatively influenced. Redfin recently analyzed 50 counties with the highest proportion of houses exposed to a high risk of drought. In more than half (38) of these 50 rural districts, more people have actually moved in than moved out. For example in Denton County, TX Almost every home is exposed to a high risk of drought. However, this county had a net migration rate of 13% from 2016 to 2020, and the average home sales price has increased 27% over the past three years.
How does storm risk affect property value?
Severe storm events have wreaked massive havoc and destruction in the United States in recent years. From Hurricanes Harvey and Ida to the 2021 winter storm in Texas. But as with the other climate risks Storm danger Doesn't put off buyers. For example, Cape Coral, Tampa, and Orlando – all of which are prone to hurricanes – were among the top 10 Popular Migration destinations in the second quarter of 2021.
However, there are some buyers who are wary of locations with high storm risk. For example Redfin agent Thomas Wiederstein of Phoenix, AZ, said some of its out-of-state buyers were relocating their home hunting from Texas to Arizona due to recent winter storms in places like Dallas. Unfortunately, in this situation, buyers swap one climate risk (storm risk) for another (heat risk).
If you decide to live in an area with high storm risk, it is vital that you prepare your home for major weather events to avoid damage and costly home repairs. If you are looking to sell your home and your property does not have storm-proof properties, it can affect your resale value. Ashley Vasquez, a Redfin real estate agent in Houston, watched some homebuyers seek discounts when bidding on properties that were lacking storm-proof propertiessuch as storm or weatherproof windows, a hurricane roof or a storm door.
What effects will climate change have on real estate and the housing market in the future?
Whether severe storms, crippling drought or forest fires – climate change will affect both the real estate and housing markets in the coming years. Here are some important changes to expect.
Higher insurance premiums
In the past, insurance was the most important tool for reducing the risk of extreme weather events. As weather disasters become more common, insurance costs have skyrocketed. In 2020, almost half (45%) of the interviewed homeowners their premiums for natural catastrophe insurance have risen. Assuming the extreme weather patterns continue, it seems inevitable that premiums will continue to rise. In the coming years, coverage in high risk areas could become more limited and insurance could ultimately become too expensive or even unavailable for some.
Increased house damage
Climate-related events can be very destructive and cause immense damage inside and out of a house. If you are concerned that your home will be damaged by changing weather conditions, it is important to take the necessary steps to minimize the risk. However, the best option for protection is to live in a low risk area.
Decreased value of houses in risk areas
While current buyer behavior doesn't show that trend – if extreme weather events worsen in the coming years, more areas of the US could become undesirable for future homebuyers. This could cause property values in these areas to decline. Should property values decline, many homeowners could find themselves in a situation where they could lose their home equity. Homeownership and home equity are an important source of wealth accumulation. As a result, it is possible that more people will choose to rent or own instead of risking falling property values.
Homeowners can also put their homes up for sale in anticipation of future climate risks. This means that real estate values can be influenced not only by the current danger levels, but also by expectations of how threats could develop.
Appreciation of houses in low risk areas
As home buyers and even renters slowly move away from negatively affected areas, relocating to areas with lower climate risk can exacerbate competition. Should demand increase in these low risk areas, buyers could see harder Offer wars and ultimately, more expensive homes.
Higher property taxes and housing costs
Municipalities in the US need to make their communities more resilient to climate change. The financing of mitigation and adaptation measures will likely have to be financed through an increase in property taxes and fees. In addition, when people leave coastal communities due to flooding or forest areas due to forest fires, the tax base in those areas will shrink, driving up taxes for the remaining ones.
"If climate change worsens, homeowners could expect higher housing costs across the board," said Redfin chief economist Daryl good weather. “Homeowners may need to install air conditioning in a heat hazard area or install a metal roof in a fire hazard area. If home buyers are able to make their home liveable in the midst of a changing climate, it could add value to their home. But these investments are not just the responsibility of individual homeowners. Local and state governments need to invest in resilient infrastructure to keep communities livable, and they need tax revenue to fund these investments. "
What can homeowners do to protect their property values and homes?
Even if homeowners cannot fully protect their properties from the effects of climate change, there are many preventative measures they can take. Here are some ways homeowners can protect their homes and plan ahead:
1. Understand your risk
The first step you can take to protect your home and its value is to identify your risk exposure. Red fins now released Climate risk data for each location on their website that can help you make more informed decisions. For example in Cape Coral, Florida, 86% of homes are already at risk of flooding, and in 30 years 99% of homes will be at risk. While in Denver, CO Only 3% of homes are at risk of flooding and that number will only rise to 4% over the next 30 years.
To better understand your risk, you can also research the most vulnerable cities for specific climate risks. Check out the 10 highest risk US cities significant flooding, Fire damage, Storms, Water stress (drought), and extreme heat* These steps will help you make more informed decisions about whether to buy, sell, or rent a home in an area that is exposed to climate risk.
2. Prove your home for individual types of risk
Improving your home's resilience to climate change can reduce the likelihood and severity of major damage. In fact, many homeowners are already investing in special updates to keep their homes safe. Nearly two-thirds of US homeowners recently surveyed by Redfin invested $ 5,000 or more to make their homes more resilient to at least one climate-related risk. For more information on protecting your home and property, see the following guides:
3. Network with insurance providers
If you are moving to a new area, especially a high risk area, you should know what types of Home insurance You need. Not every insurance policy covers every climate-related event. Therefore, make sure that your home is adequately secured. Still, if you are already a homeowner, it is important that you review your policy and get confirmation from your insurance agent that you have adequate insurance coverage. Even if you may never need special climate risk insurance, it gives you peace of mind and can be extremely beneficial in the event of an unexpected natural disaster.
4. Monitor property value
The best way to find out if climate change is affecting the value of your home is to monitor property value. There are a few ways to do this. First, you can get one Instant home value appraisal and a free home equity report on Redfin.com. When you enter your address, you'll see a Redfin estimate for your home based on recent sales in your neighborhood. You can also monitor your property value by examining the value of other properties nearby. For more information, see our guide at 5 Ways to Find Real Estate Comps Near You.
5. Collaborate with your community
Homeowners and community members can also play an important role in combating climate change and protecting their residential area. For those who live in areas of high fire risk, homeowners can work together to clean up fire-prone shrubbery in their neighborhood. For those who live in an area with high storm risk, neighbors can share ideas on how to make their homes stormproof. Parishioners can also appear in town halls and advocate investing in climate resilient infrastructure to protect the entire community as a whole.
Unfortunately, the risk of climate change is going nowhere. While US climate risks are not yet having a major negative impact on property value, property values are likely to be negatively impacted as extreme weather events increase in frequency and severity.
LAW: Redfin does not provide health, legal, financial, or tax advice. This article is for informational purposes only and is not a substitute for professional advice from a doctor, licensed lawyer, financial advisor, or tax professional.
* Climate Check data is for informational purposes only. Read more about the Climate Check methods here. Flood Factor ™ is a tool made by the nonprofit First Street Foundation. It uses the First Street Foundation Flood Model, a nationwide probabilistic flood model that shows a site's risk of flooding from rain, rivers, tides, and storm surges. It builds on decades of peer-reviewed research and predicts how flood risks will change over time due to environmental changes. Flood Factor ™ is not intended to consider all possible flood risks.