Climate change threatens $1.47 trillion in U.S property values by mid-century

Danielle Hale Chief Economist | realtors.com

Growing risks from climate change are projected to significantly impact U.S. home values and population distribution over the next 30 years, according to a recent study by First Street. The analysis predicts that $1.47 trillion in property value could be erased by 2055, affecting more than 70,000 neighborhoods nationwide.

The potential decline in real estate values is attributed to rising insurance costs due to frequent natural disasters and climate-related migration. These factors include chronic changes such as rising sea levels and droughts, as well as wildfires, hurricanes, and tornadoes. Such events are expected to increase insurance premiums, prompting residents to move to safer areas.

First Street's report estimates a 29.4% surge in home insurance premiums over the next three decades. By 2055, it is anticipated that over 55 million Americans will relocate within the U.S., with an initial movement of 5.2 million this year alone.

Counties predicted to experience significant population declines include Fresno County, CA (-45.8%), Ocean County, NJ (-33.3%), and Monmouth County, NJ (32.4%).

The Sun Belt region is expected to face considerable challenges due to climate change-induced migration patterns. Historically attractive for its quality of life and affordable housing, the region now confronts increased risk and expense due to climate factors.

Realtor.com senior economic research analyst Hannah Jones highlights the influence of recent climate events on homeowners' decisions: “Recent climate-related events weigh heavy on the minds of homeowners and home shoppers alike,” she says.

Insurance premiums in Sun Belt metros have risen dramatically compared to mortgage payments between 2013 and 2022. Miami leads with a projected premium increase of 322%, followed by Jacksonville at 226%, Tampa at 213%, New Orleans at 196%, and Sacramento at 137%.

Despite these challenges, some areas like Miami and Tampa continue attracting residents due to strong local economies. Houston exemplifies resilience despite experiencing costly natural disasters; Harris County has grown significantly since 2000.

However, experts caution that this resilience may not last indefinitely as climate risks accumulate. Jones warns: “As climate-related risks build, buyer demand is likely to fade in affected areas.”