Housing Market 2023: 3 States Hurt Most by Climate Change

Climate change is making its mark on real estate. Weather-related issues such as rising temperatures, increasingly violent storms and unprecedented wildfires are causing people to think twice about where they live.

“I’ve witnessed a tangible trend of individuals and families seeking refuge from climate risks by relocating to more climate-resilient areas,” said Rick Gruebele, broker-owner at Visions First Realty in Washburn, Wis. “Buyers are demonstrating a greater emphasis on long-term safety and sustainability when making real estate decisions.”

Here are three states where the real estate markets have been most affected.

Also see why retirees are expected to sell their homes in these 10 cities.

California: High Fire Zones Becoming More Challenging for Residents

“In my area — El Dorado County, California — we are finding that the high fire zoning is creating a hardship for sellers and for buyers,” said Debra Miller, real estate agent at CENTURY 21 Select Real Estate in Placerville, Calif.

She said some sellers are putting their properties on the market and moving away from high fire zoning areas for a variety of reasons.

“Because of the high fire zoning, they are either seeing an increase in their homeowners insurance — sometimes as much as 12% a year — or their insurance has been cancelled by their long-term provider,” she said. “In the instance of cancellation, sometimes their only option is the California Fair Plan, which is basic structure coverage and does not cover contents, upgrades or extra buildings.”

Miller said the California Fair Plan is expensive and requires people to have a second wrap-around homeowners insurance policy.

“Another reason for sellers selling is the higher cost of insuring a home against fire damage or loss combined with maintaining the property to vegetation management and CalFire regulations,” she said. “These requirements create a hardship with property maintenance cost.”

She said this can be especially challenging for homeowners on limited incomes.

“For buyers, the high cost of homeowners insurance creates a situation where the cost can throw the buyers’ borrowing margins off,” she said. “This creates a situation where the buyer either can’t qualify for a loan for that home or a situation where they must consider a less costly home to account for the insurance costs.”

While buyers are more cognizant of these issues, Miller said it hasn’t stopped them from purchasing homes in these areas.

“In fact, we are currently experiencing a low inventory of homes and multiple offer situations,” she said.

Florida: Residents Moving Inland

“Florida has witnessed a surge in residents moving from high-risk coastal zones to safer inland areas, driven by the increasing threat of heat, floods and hurricanes in past years,” said Josh Steppling, a real estate agent in Stuart, Fla. “As a real estate broker, I’ve assisted clients selling properties in vulnerable regions and noticed that buyers have become markedly cautious about climate-related vulnerabilities.”

He said this is causing some buyers to think twice about properties that previously would have been considered dream homes.

“For instance, a beachfront property that would have been a prime investment a few years ago is now a tougher sell with hurricane and flood concerns and rising insurance costs,” he said. “Clients are prioritizing homes with resilient features and elevated locations.”

Colorado: Buyers Thinking Twice About Purchasing in Mountains

“In Colorado specifically, the Marshall fire in December 2021 brought a renewed awareness to the vulnerability of some communities to natural disasters, as well as the increasing need for fire mitigation and prevention measures,” said Alexandria Reed, CEO and Realtor at Elevate DNVR.

While known for its beauty and recreational opportunities, the state’s mountainous region has faced scrutiny due to its increased wildfire risk.

“Buyers are now more cautious when considering properties in these areas, considering fire mitigation efforts and the potential impact on their insurability and insurance rates,” Reed said. “Equally so, in northern and eastern parts of the state, we are seeing similar trends related to the risks of tornado and hail damage and the potential losses that could be sustained based on those risks.”

Overall, she said, climate change has definitely influenced the housing market, as buyers have become more concerned about weather-related risks and the added expenses attached to buying a home in areas considered less safe and sustainable.

Overall Impact of Climate Change on American Real Estate

Here are a few ways climate change has affected the real estate market over the past two years.

Decreased Demand for Heat-Impacted Areas

Certain previously beloved areas are losing popularity with buyers, because they’re literal hotspots.

“Increasingly frequent and severe heat waves are driving residents away from regions where scorching temperatures have become unsustainable,” Gruebele said. “Cities and urban centers are witnessing residents seeking cooler climates to ensure their well-being.”

Less Interest in Flood and Fire-Prone Zones

While some areas might be otherwise desirable, if they’re prone to floods or fires, this is quickly becoming a deal breaker for many.

“Escalating risks of flooding and wildfires have led homeowners to reconsider residing in areas vulnerable to these events,” Gruebele said. “This migration is notable among families and individuals who prioritize safety and stability.”

Buyers More Cautious With Property Selection

Instead of just focusing on the home itself, many buyers have become more aware of its surroundings.

“Buyers are showing heightened awareness of climate risks and are becoming more discerning in their property choices,” Gruebele said. “Many are seeking homes in locations with better resilience strategies, such as robust infrastructure and sustainable development.”

Increased Demand for Resilient Home Features

Just any home won’t cut it for some more cautious buyers who want to be sure they’re making sound investments.

“Demand for resilient home features — including flood-resistant construction, fire-resistant materials and energy-efficient technologies — is on the rise,” Gruebele said. “Buyers value properties that offer protection against climate-related challenges.”

Reduced Demand in High-Risk Areas

In certain areas, buyers have become more discerning about properties attached to high climate risk, which is an issue for sellers.

“Regions facing the highest climate risks are witnessing reduced demand for properties, leading to potential declines in property values and market activity,” Gruebele said.

Rising Demand in Climate-Resilient Locations

Sellers in areas perceived as more adept at weathering climate change may be able to get more from their investment than expected.

“Areas perceived as climate-resilient, featuring moderate weather patterns and comprehensive disaster preparedness, are experiencing increased demand and potential appreciation in property values,” Gruebele said.

These are issues the housing market is facing in many areas across the U.S. due to climate change. Several other real estate agents have shared personal accounts of the impact they’ve seen in their local areas.

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