Some areas with high risk of climate impacts posting double-digit growth. Will housing market eventually shift?
By Ashley Fahey
Tampa Bay Business Journal
Published: Aug 30, 2021

Climate change is becoming an increasingly important factor in the housing market, with major residential real estate websites now including "climate risk" among data points provided to prospective buyers.

But that's not stopping buyers from purchasing homes in some of the most climate-averse places across the country — at least, not yet.

A recent analysis by Seattle real estate firm Redfin Corp. found the 50 U.S. counties with the largest percentage of homes facing high heat, drought, fire, flood and storm risk saw their populations grow an average of 4.7% between 2016 and 2020.

Meanwhile the 50 counties with the largest percentage of homes facing high drought, fire, flood and storm risk saw average population growth of 3.5%, 3%, 1.9% and 0.4%, respectively, in that same time period. Redfin analyzed data from climate-data startup ClimateCheck, county property records and the U.S. Census Bureau.

Daryl Fairweather, chief economist at Redfin, said affordability remains a key driver for where people purchase homes. Areas like Florida and Texas may see outsized impacts from climate change but are still more affordable than other parts of the country.

"People are very much aware of climate change and how it could impact their property values but when it comes to where they’re actually moving, it’s not showing up as a top concern," Fairweather continued.

Buyers are not necessarily cognizant of how much utilities, insurance or maintenance and upkeep costs could add up in areas experiencing a disproportionate level of climate-change impacts.

Selma Hepp, deputy chief economist at CoreLogic Inc., said the company has developed a Hazard Risk Score. The scoring suggests the climate risk of a geography does adversely impact home prices, but Hepp continued, with there being so little housing inventory, tremendous demand and the pandemic, it's hard to ascertain how much climate risk itself is impacting home prices

Higher insurance rates in climate-adverse areas is also expected to be a growing factor for housing costs, Hepp added. New code requirements and building materials in construction aimed at staving off climate impacts are also part of the calculation now in new home prices.

Mortgages are also poised for climate change-related disruption, especially for homes in an area prone to flooding, fires or other extreme-weather events. Some lenders may not be willing to finance properties in the areas most at risk.

In areas where the costs are piling up, it may mean that only the wealthiest homebuyers can afford to buy in those metros, Fairweather said.

Hepp said in California, there's been a lot of anti-density sentiment in some cities, pushing homebuilders to wildland-urban interface zones — usually ares with high-fire risk. New homes built there may, perhaps, be relatively affordable compared to much of California's housing stock but face a greater chance of being impacted by wildfires. Those homes may also be more likely to see home-value depreciation because of their precarious location, Hepp said.

The effects of climate change on the housing market might take five or 10 years — possibly longer — to materialize in a serious way but, Hepp said, it's definitely going to play out in home prices.

"We do already see that, particularly in expensive areas in northern California that see persistent fires," she continued. "I think we’ll see it elsewhere as well."

Florida, for example, is much more affordable than a state like California but as more people get exposed to climate hazards there — such as hurricanes or extreme heat — that may have more buyers reconsider.

Redfin analyzed risk based on five climate factors — heat, drought, fire, flood and storm — in conjunction with where people moved between 2016 and 2020.

One of the fastest-growing areas facing heat risk, based on expected number of extremely-hot days in the future, is Williamson County, Texas, which is part of the booming Austin metro area. It saw its population grow more than 16% between 2016 and 2020.

Dell Technologies Inc. and Apple Inc. are some of the major companies with employment hubs in Williamson County.

Drought risk, evaluated by expected water-supply stress, is high among three Colorado counties seeing a rapid rate of growth, led by Custer County, south of Colorado Springs.

Although a rural area, Custer County posted 16.8% population growth between 2016 and 2020, Redfin found.

Redfin noted Cape Coral, Tampa and Orlando, Florida — all prone to hurricanes — were among the 10 most popular migration destinations in the second quarter of this year, in addition to posting big growth between 2016 and 2020. Wake County, North Carolina, includes Raleigh, another rapidly growing metro area.