Rising sea levels, drier summers, snowier winters, larger wildfires, more severe flooding — the impact of climate change can no longer be denied, and homebuyers are increasingly factoring it into where they buy, agents told RealTrends.
According to a 2021 Redfin survey of 2,000 homebuyers, roughly half of the respondents who plan to move in the next year said extreme temperatures and/or the increasing frequency or intensity of natural disasters played a role in their decision to relocate and one-third of people said rising sea levels played a role for them. And nearly 80% of respondents said that increasing frequency or intensity of natural disasters in an area would make them hesitant to buy a home there.
“The younger generations buying homes are more hyper aware of it,” said Becca Summers, a Provo-Orem, Utah-based Keller Williams agent. “The older generations tend to be like, ‘Well, this is where I want to be.’ I am not always sure if it is a budget conscious thing with insurance or if it is more than just environmental concerns, but younger buyers are definitely more interested in knowing about access roads, and flood and fire safety.”
Anne-Marie Wurzel, an Orlando-based agent at Mainframe Real Estate, sees more geographic trends than generational trends in her markets.
“Florida basically sits at sea level so even if you’re not in a flood zone, it’s a great idea to have flood insurance, and it’s normally cheaper if you’re not in a flood zone,” Wurzel said. “I do have buyers asking about flood zones more regularly when the property they’re considering is on or near water.”
In partnership with researchers from University of Southern California, the National Bureau of Economic Research and Massachusetts Institute of Technology, Redfin conducted a three-month randomized controlled trial from October 12, 2020, to January 3, 2021 involving 17.5 million Redfin users, half of which had access to property-level flood-risk scores (treatment group) and half of which did not (control group). The flood risk data used by Redfin came from First Street Foundation’s Flood Factor, which measures the likelihood that a property will flood at least once in the next 30 years, scoring the property from 10 (extreme risk) to 1 (minimal risk).
The Redfin study found that homebuyers who have access to flood-risk information when browsing home listings online are more likely to view and make offers on homes with lower flood risk than those who do not have access to this data. Users who viewed homes with an average flood-risk score of 8.5 (severe/extreme risk) prior to the study went on to bid on homes with an average score of 3.9 (moderate risk) after gaining access to flood-risk data—a decrease of 54%. Users who viewed homes with an average score of 8.5 before the study but did not get access to risk data went on to bid on homes with an average score of 8.5. However, Redfin noted that the impact of this data on users was only seen in users who had been viewing homes with sever/extreme risk prior to the study. This suggests that flood danger is currently unlikely to change homebuyer decision making unless the risk is substantial.
“We now have definitive evidence that the risks posed by climate change are affecting where Americans choose to live,” Daryl Fairweather, Redfin’s chief economist said in a statement. “Equipping people with flood-risk information helps them make more informed decisions. Some will opt to move out of risky areas altogether, while others will stay put but invest in making their homes more resilient to disaster.”
Fairweather continued: “As more house hunters become aware of climate risk, homes in endangered areas will likely receive fewer offers, causing home values to fall.”
Summers has seen a similar trend in the Provo-Orem market.
“Sometimes it is a surprise when we get the insurance estimate and that impacts the offer price on the house, which in the long run actually hurts the resale value of the whole neighborhood,” Summers said.
Out in the Los Angeles area where fire danger is more prevalent, Michael Nourmand, the president of brokerage Nourmand & Associates, said he has noticed more buyers inquiring about fire insurance costs before making an offer.
“Over the past several years, premiums for homeowner’s insurance has gotten much more expensive,” Nourmand said. “Buyers are often talking to their insurance broker before they put in an offer particularly if the home is in the hills and/or in a high fire zone. This is factored into the cost of homeownership and therefore the price they offer, since it can be a much larger percentage of the property’s monthly cost than in years past. And if they don’t know the cost of homeowner’s insurance when they put in an offer, they are talking to their insurance broker before they remove their contingencies and their initial deposit is in jeopardy.”
But while flood and fire insurance can be expensive and potentially impact a buyer’s decision to bid on a home, Summers said that if the buyer has already fallen in love with the property when they get the bad news they are more likely to be able to overlook this.
“Most buyers will notice if a property is in a flood zone because as part of the lending process the lender verifies the risks, so if the buyer knows before they put in an offer, they are less likely to even go see the property,” Summers said. “But if they have already fallen in love with it, they are more likely to buy the property because it is an objection they can overcome.”
Currently, of the four major property listing sites, Redfin, Realtor.com, Zillow and Trulia, only Redfin and Realtor.com display climate risk data with their listings.
Realtor.com began displaying flood and fire risk data in August 2020 and was the first site to do so, while Redfin currently publishes the climate risk data (including fire, heat, drought, storm, and flood) for nearly every U.S. home, with the exception of rentals.
Despite interest in this information form homebuyers, Zillow Group, which owns both Zillow and Trulia, said it does not plan on publishing this information in the near future.