Interestingly, some rather surprising supply-and-demand scenarios resulted in the short- and long-term aftermath of different natural disasters in recent years.
Rising Sea Levels
Real estate in coastal areas tends to get people worried about the potential for flooding. Waterfront properties usually cause the greatest concerns among prospective buyers, although neighboring areas can experience some of this effect of climate change.
Between 2011 and 2016, home sales in areas prone to flooding grew around 25 percent slower than nearby properties outside of flood zones.
In Miami, Florida, data suggests that homes that are vulnerable to rising sea levels sold at a 7 percent discount compared to similar properties outside of high-risk areas.
Repairs and Insurance
Part of the lower valuations likely comes from concerns about possible repair costs and personal property damage. A related factor has to do with the expense of flood insurance.
Flood insurance usually isn’t included in homeowner’s insurance policies, instead requiring an additional purchase.
This increases the overall cost of obtaining the home, often in direct proportion to the risk or likelihood of flooding.
This is especially true anywhere flood insurance is either required by law or a prerequisite of a potential mortgage lender.
Hurricanes Are Another Effect
Interestingly, hurricanes tend to have little impact on real estate values over the long term, although the short term the impact can be significant.
Typically, once an area rebuilds, buyers are willing to overlook the risk if they genuinely want to live near the coast.
However, the short-term impact can be significant in areas where people are less likely to have flood insurance.
Without Flood Insurance
In areas where people are less likely to have flood insurance, more homes end up going without repairs because people can’t afford to rebuild.
This can result in abandoned properties with lingering damages that can drag down the values of undamaged properties nearby.
In Houston, which was ravaged by Hurricane Harvey in 2017, approximately 9 out of 10 homes didn’t have flood insurance.
This increased the odds that homeowners would walk away from damaged properties, leaving them vacant and unrepaired.
Additionally, the length of the recovery plays a role. One report suggests that the full cleanup and rebuild from Hurricane Harvey could take upwards of 20 months.
While peak remodeling hits about three months after the event — that’s the timeline for bank foreclosures — some areas could still appear damaged well into 2019.
Where There Are Wildfires
Meanwhile, the effects of heatwaves and droughts can have an entirely different effect on real estate values. In fact, it can be downright counterintuitive in some cases, such as the areas struck by wildfires during the fall of 2017.
In late 2017, after fires ravaged portions of Northern California, housing prices actually rose. In Sonoma, the median price went up by 6.1 percent. Napa saw even more growth, reaching 7.5 percent, and Santa Rosa saw values skyrocket by 9 percent.
The reason for this actually differs from what happens in coastal areas. Instead, residents who lost their homes to the wildfires and were determined to stay in the area. That wound up shrinking the number of available properties, which in turn intensified demand and opened things up to bidding wars.
Before any fires broke out, the area already had a housing shortage; the wildfires only exacerbated the problem. Undamaged homes, in some cases, saw offers as high as $200,000 above the asking price.
However, if a particular neighborhood was caught in the blaze, and a single home was spared, that individual property’s value dropped.
Few people want to live amid burned-out houses, so houses surrounded by damaged or abandoned properties can lose value, typically around 10 percent.
As the neighborhood rebuilds and time passes, real estate prices tend to correct themselves. Within about five years, any discount for being surrounded by burned out homes generally dissipates.
Climate Change Impacts Real Estate Values
Ultimately, climate change does impact real estate values, although that doesn’t always mean they fall, even immediately following a disaster.
That said, it’s wise to consider the risk before purchasing a property and make sure to secure the proper insurance to assist in post-disaster recovery if you choose to buy in a potentially at-risk area.
Readers, did you or someone you know have a home damaged by a disaster? Tell us about it by posting in the comments section beneath this post.
If you liked this article, you just might enjoy these others on the topics of real estate and climate change: Give these a try:
- 10 Things You Can Do If You Can’t Sell Your House
- How to Rebuild When There’s a Severe Shortage of Construction Workers
- 10 Housing Markets That Are Sill Affordable
- Can You Buy Last-Minute Hurricane Insurance?
- Climate Change Warning: Gulf Stream Currents at 1,600 Year Low
- Beware of Hysteria Marketing: Premade Emergency Kits Are Ripoffs
- California Declares Drought Emergency: Easy Ways to Save Water
- Keep Cool Without Overspending This Summer
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