Study: Homes in high-risk flood areas appreciated about 5% less than homes in low-risk areas over the past five years. For homes in fire-risk areas, it was 3% less.
CHICAGO – Demand may fall for homes in areas at high risk of natural disasters, such as flooding and wildfires, which could cause price growth to slow. A new realtor.com analysis shows that properties in such areas will likely see 5% less price growth in 2021 than homes in similar areas at low risk of natural disaster.
This trend is already rising. Home sales price growth in high-risk flood areas was 5 percentage points lower than similar homes in low-risk areas over the last five years. For homes in high-risk wildfire areas, properties saw a 3-percentage-point-lower increase.
“As the impacts of climate change and worsening natural disasters become more well known, it’s natural for home shoppers to take these factors into account when deciding the purchase price of a home, and tools that make information about these risks more available to buyers will help them make good decisions,” says Danielle Hale, realtor.com’s chief economist. “When buying a home in a flood- or fire-prone area, home shoppers should budget for the added costs of home insurance, mitigation practices and potential losses – which can add to the total cost of ownership for the home.”
Over the past five years, homes with severe or extreme risk of flooding in 78 coastal counties with hurricane-related disaster declarations saw a sales price growth per square foot of 25%, according to the realtor.com analysis. That compares to 29% for homes with moderate or major risk and 30% for homes with minimal or low risk.
“The impact of flood risk on home prices appears to be getting more pronounced over time,” the study says. “In 2014, 33 of the 78 counties studied saw high-risk properties appreciate slower than those with less risk, while in 2019, this was true of 40 counties. The trend was most pronounced in Delaware, Florida, Massachusetts and Maryland.”
Home prices tend to be most vulnerable following a hurricane or extreme weather event.
Properties in wildfire-prone areas also appreciated more slowly. For example, the prices of homes in California within a one-mile radius of historical fire perimeters increased by 32% compared to 35% for other homes in the same county between 2014 and 2019. Price gaps were most evident in Lake, Solano, Monterey, Los Angeles, and Sonoma Counties.
© Copyright 2020 INFORMATION INC., Bethesda, MD (301) 215-4688
Go to Source