A recent Forbes survey reveals nearly a third of Americans cited climate change as a reason to move last year.
For aspiring homeowners, climate has transitioned from a selling point to a critical risk factor. Prospective home buyers must educate themselves on the tangible impacts of climate change to safeguard their property investments from potential catastrophic events.
When sizing up a property, environmental considerations used to be a matter of taste. Does the buyer prefer warm, sunny summers on the coast or the snug, cool, white winters of the northern interior? Now, aspiring homeowners must consider how climate change will affect their property over the long run and what costs they may incur as a result.
“As awareness of risk grows, the financial value of risky places drops,” says climate futurist Alex Steffen. The rising costs of climate change will make some properties indefensible.
“[They] will be unofficially abandoned. That will then create more problems. Bonds for big projects, loans, mortgages, business investment, insurance, talented workers — all will grow more scarce… then, the value will crash,” Steffen predicts.
Coining the term “brittleness bubble,” Steffen wants to raise awareness. These brittle properties, prone to sudden, irreparable climate-fueled failure could create unrecoverable losses for their owners. The climate crisis poses dire choices, especially for those buying a home for the first time.
Yet being forewarned is being forearmed. The sooner investors and home buyers alike bone up on the ground facts of climate risk, the better they can mitigate their property portfolio against the perils of extreme weather.
Few Good Options
As a global phenomenon, climate change impacts human populations everywhere. No region in America is truly immune from the fallout. When disaster strikes one part of the country, everyone suffers since they depend on the supply of goods and services nationwide.
However, some regions are being hit sooner and harder than others. This information can help those buying land as an investment navigate the ever-changing climate map.
Data from First Street and Moody's Analytics shows that Texas, Florida, New Jersey, and California, four of the country's largest and most populous states, are all likely to face more climate change risk sooner.
With its vast coastline and wetland ecosystem, Florida is most vulnerable to rising sea temperatures and exacerbated tropical storms. The state has been a favorite destination for “snowbirds” from the North, especially among Canadian homebuyers. Florida accounts for almost half of all Canadian property purchases in the United States.
According to the 30-year forecast by Moody's, climate change events will continue to affect communities up and down the East Coast and, at some point, will impact the livability of states such as Florida and the Carolinas. In the Southwest, e.g., Arizona, record heat and fires increase weather dangers and threaten reliable water supplies.
The nation's interior is also feeling the climate stress, with intense heat and unprecedented rainfalls recorded in recent years. As the weather becomes more extreme, smaller, less exposed cities such as Boise, Idaho, are poised for an influx of newcomers seeking shelter from climate catastrophe.
Floods And Fires
Of all the natural disasters impacting home valuations in the U.S., wildfires and flooding are among the most damaging.
As more study on climate change risk is undertaken, the potential effect on the American real estate market becomes apparent. For instance, the journal Nature Climate Change recently published a study that claims property prices in flood zones are overvalued by $121 to $237 billion.
“Increasing flood risk under climate change is creating a bubble that threatens the stability of the U.S. housing market,” said lead author Dr. Jesse Gourevitch, a postdoctoral fellow at the Environmental Defense Fund. “These risks are largely unaccounted for in property transactions, encouraging development in flood-prone areas. Accurately pricing the costs of flooding in home values can support adaptation to flood risk, but may leave many worse off.”
Unfactored environmental risks bode poorly for low-income households. The study found this demographic may lose up to 10% of their property's market value to the risk of significant flooding.
“For many people, their most valuable asset is their home. We need policy approaches that improve the transparency of climate risk in markets while providing increased support and protection for frontline communities,” said co-author Dr. Carolyn Kousky, Associate Vice President for Economics and Policy at the Environmental Defense Fund.
The rising risks will make home ownership, already out of reach for most Americans, even more unaffordable. The increasing costs of covering the damage from natural disasters are unsustainable for homeowners and insurance companies.
Huge claims from natural disasters in states such as California and Florida leave companies rethinking their risk and opting out of insuring susceptible regions. State-backed insurers cover some gaps in this landscape, but the premiums only sometimes cover the bills that homeowners are forced to pay. This situation worsens as climate change continues to upend the weather patterns and wreak havoc through extreme weather events.
Slowing the impact of climate change is a global effort requiring deeper coordination between governments, corporations, citizens, and the world. Unfortunately, the average American can do little to change the broader trends
However, by being informed of the dangers posed by climate catastrophe, homeowners can prepare for the worst and safeguard their families' future. Real estate remains many Americans' primary investment vehicle, so contingency planning is urgent. Without it, a local extreme weather disaster could bring untold financial ruin.