Projected climate impact on U.S housing market reveals potential losses

As climate change intensifies, certain regions are expected to face significant declines in home values, while others may benefit from their resilient locations. According to projections by analytics firm First Street, areas identified as "climate abandonment" zones could see an average property value decline of 6.2% through 2055. These zones are likely to experience rising insurance premiums and declining populations.

Fresno County in California is projected to be the most affected, with anticipated home value losses of 10.4% over the next three decades. The report also forecasts a 46% population decline in Fresno County during this period, alongside a 56% rise in insurance premiums.

Other regions expected to suffer substantial population losses include Ocean County and Monmouth County in New Jersey, Sacramento County in California, and Jefferson County in Alabama. Jeremy Porter, head of climate implications research for First Street, notes that these areas show a "statistical relationship between that climate risk and negative population change."

First Street projects that approximately 21,750 neighborhoods—26% of all census tracts—will face premium spikes and associated population decline through 2055. Collectively, these areas are expected to see a 38% drop in population over the next thirty years.

Conversely, "climate-resilient" zones are predicted to experience population growth and minimal increases in insurance premiums. This category includes just 4,107 neighborhoods or about 5% of all census tracts but is expected to see strong home price appreciation averaging 10.8% through 2055 due to stable insurance rates and aggregate population growth of 68%.

Dane County in Wisconsin leads this category with projected property value appreciation of 13.5%. Other resilient areas highlighted include Denver County and Arapahoe County in Colorado; Douglas County in Nebraska; and Johnson County in Kansas.

Porter explains that for climate-resilient areas there are "really positive impacts from growing population" with relatively minor impacts from increasing insurance costs.

Meanwhile, First Street anticipates that many parts of the country will continue to see population growth despite higher climate risks and rising insurance premiums. Known as "risky-growth" areas, they comprise the largest category tracked by First Street at 33%. Population growth is projected to increase by 76% by 2055 in these regions.

However, while demand may boost home values somewhat in risky-growth areas, it might not fully offset valuation declines caused by higher insurance rates. Overall home values are projected to decline by 1.7% through 2055 across these regions.

Porter remarks that "the risky-growth areas are actually projected to grow faster than any other group," attributing this trend to various factors including economic and social characteristics drawing people into those communities.

The top five risky-growth areas identified by First Street based on projected population growth are located entirely within Texas: Fort Bend County, Denton County, Williamson County, Travis County, and Montgomery County.

Nationally speaking, First Street projects that escalating climate risks could erase $1.47 trillion from U.S. home values over the next thirty years—a figure representing around three percent of current total U.S residential property value due primarily to pressures on insurance costs coupled with shifting consumer demand patterns.

"There are going to be communities where it's a much larger impact on their property values," Porter says regarding regional disparities within national trends toward fluctuating real estate valuations amid evolving environmental conditions.

First Street's risk assessments can be accessed at the property level via Realtor.com listings under an “environmental risk” heading along with dynamic map visualizations available per individual listing pages online.

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