Climate change could wipe out a whopping $1.47 trillion in real estate value over the next 30 years and fundamentally transform the housing market, according to a new report.
The study from First Street found some troubling results for the residential real estate industry, currently valued at $50 trillion. It said climate change is transforming the housing market via “soaring insurance costs and shifting consumer preferences.”
The trends are creating a so-called “feedback loop where climate risks drive population movements and reshape property values across the nation, fundamentally altering traditional patterns of real estate growth and community development,” the report said.
In many climate-change prone places, insurance costs are rising much faster than mortgage payments, made worse by that the fact that the states where people are moving to in the Sun Belt are the same ones absorbing most of the natural disaster costs. Since 1980, 40% of the $2.8 trillion in natural disaster costs have been in Florida, Texas, and California. Insurance costs in these states have risen exponentially, making it harder for people to afford to protect their home.
The report found the five largest metro areas facing the highest insurance premium increases are Miami, Jacksonville, Tampa, New Orleans, and Sacramento.
The report also predicts in the next few decades, climate changes and insurance costs will cause 55 million Americans to “voluntarily relocate within the U.S. to areas less vulnerable to climate risks by 2055.”
This, in turn, has the potential transform local markets, affecting more than 70,000 neighborhoods in 84% of all census tracks and decreasing home values. Combined with rising insurance costs, some communities might be all but abandoned and many could become economically untenable for homeowners.
“Economic strength alone may not be sufficient to retain population in areas facing severe climate impacts, as evidenced by projected ‘tipping points’; in some currently growing metropolitan areas,” the report said.