How Climate Change Affect Property Prices in Different States
April 12, 2020
In recent years, prospective homebuyers have started considering climate change-related natural disaster risks before making home purchases. However, these considerations have not yet impacted their actual purchasing behavior. Concerns associated with climate change have started creeping into buyers’ minds because of increased natural disaster occurrence. Today, there are many more powerful storms, massive wildfires, inundating floods and devastating mudslides than in the past. Every time these disasters are covered by the news, public awareness of ever-increasing climate-related risks is heightened. With all that said, each demographic has a different level of concern about these potential hazards. A recent study found that it varies across geographic location, income and race.
Not long ago, the Seattle-based real estate brokerage firm Redfin studied the issue. They examined twenty-nine different metropolitan areas and surveyed 3,000 Canadian / American residents involved in real estate transactions last year. Only 10% of those surveyed didn’t think the issue was relevant to their real estate decisions. Conversely, the overwhelming majority of respondents, 73%, felt that growing natural disaster concerns at least “somewhat” affected their home purchasing or selling determinations. The level of anxiety about climate change-related problems varied greatly according to a buyer or seller’s geographic location. Midwestern residents were the least anxious about these potential risks, while more than a third of northeasterners and southerners thought these were serious real estate considerations.
Individual city results were, perhaps, more intuitive. Of all those questioned, people living in coastal cities were most fearful of the potential for more intense and frequent natural disasters. This was understandable since climate change would most severely impact them first, before those living in interior regions. Survey results showed that, out of all the twenty-nine metropolitan areas studied, Houston respondents were most anxious about the issue. Almost 60% of Houstonians asked thought these potential natural disaster risks would greatly impact their decision to get involved in real estate transactions. Residents of other major coastal cities, like New York City (47%) and Miami (46%), were similarly concerned. Houstonians’ extreme anxiety about this issue could be due to Houston’s long history of record-breaking natural disasters that started with the Galveston hurricane of 1900, which killed more people than any other natural catastrophe in U.S. history. Moreover, the frequency of these destructive events has seemingly increased recently, with the city enduring numerous record-setting weather calamities since just 2016. In only the past four years, Houston has suffered two hundred-year events, a once in five hundred years rainfall and massive flooding from at least two major tropical storms.
Not only did survey respondents’ geographic location affect their level of concern about climate change-related risks, their incomes and race also played a role. Only 34% of those making less than $100,000 annually thought these issues were “very” important, compared to 42% of those making more than $200,000 a year. This difference could be explained simply by the fact that wealthier people tend to purchase/sell expensive waterfront properties more affected by coastal storms and flooding, while average earners usually buy more inland real estate (like in Midwestern states) less susceptible to natural disasters. The survey also found that race impacted a person’s anxiety about climate-related perils. Almost half of African Americans surveyed said these risks were “very” important to them when thinking about purchasing a new home. At the same time, only 32% of whites thought they were such important considerations. These findings could simply be an expression of where each racial group tends to live. Most American blacks live in coastal cities, while more whites live inland and in Midwestern areas that are currently far less impacted by climate change issues.
This study uncovered some interesting things about the effects of climate change on home buying and selling. Redfin’s chief economist Daryl Fairweather said it indicated that “Natural disasters impact different demographics and income groups in different ways.” However, even though these risks are known and considered, they have not substantially affected either prices or buying habits yet. As Fairweather further concluded, while “climate change is important to house hunters…it’s outweighed by other factors that feel more immediate, like affordability and access to jobs.” Perhaps, in the future, real estate purchasing and selling behaviors will change, but now risks associated with climate change have a limited impact on industry transactions.