Environment & Energy
Related: About this forumIf Nothing Else, Maybe Falling RE Values, Lack Of Insurance May Draw Attention To Climate Collapse
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Not every buyer is as diligent about evaluating the potential risk of a weather-related disaster, but that may change in the future. Violent storms, wildfires, floods, droughts and extreme heat are among the increasingly visible signs of climate change. While safety issues associated with these events are of prime importance, the frequency and intensity of dramatic natural disasters are beginning to have an impact on property values and the cost of homeownership in some locations. Researchers are analyzing data to help buyers, homeowners, lenders, insurance companies and appraisers evaluate what the future may hold and how that could impact the housing market.
Most homeowners should care about climate change and the potential impact on their families and property, says John Berkowitz, CEO and founder of OJO Labs, a real estate technology firm that owns the Movoto listing site in Austin. Unfortunately, the people who are most likely to be hurt are already disadvantaged in the housing market, such as first-time buyers and minority buyers who are focused on affordability now. They dont have the luxury of time or money to think about what their property value will be in 2050.
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Seiler says he believes that eventually climate risk may become part of the mortgage underwriting process. The report found that, in addition to increased flood risk and property damage, climate change may increase mortgage default rates, increase the volatility of house prices and possibly produce climate-related migration patterns. If people choose to move away from areas with high risks from fires, floods and storms, that could reduce property values in those communities. After Hurricane Katrina, the mortgage industry didnt know whether borrowers would default on their loans, says Seiler. The FEMA maps were way out of date, so people who were at high risk for floods didnt know it and didnt have flood insurance. In that case, the federal government stepped in. But we know that when people are underwater on their loans, they default more often. Another risk is that if insurance rates skyrocket, the cost of having a home would be so high that owners would be unable to repay their loans, Seiler says.
Insurance companies raise rates as much as 20 or 30 percent in high-risk areas compared to low-risk areas, says Brian OConnell, a senior insurance analyst at InsuranceQuotes.com in Bucks County, Pa. Buyers should expect to see rates increase as we see more floods, fires and heat waves. Alternatively, some insurance companies may simply get out of the business, which could also increase costs because of the lack of competition for customers. Some insurance companies also raise the deductible for specific events such as hurricanes, which leaves homeowners responsible for thousands of dollars of repair costs, according to OConnell.
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https://www.washingtonpost.com/business/2022/03/24/what-climate-change-will-mean-your-home/
bucolic_frolic
(43,146 posts)It's risk management, and risk assessment. The public is really, really, really bad at that.
dutch777
(3,013 posts)As stated, anyone trying to purchase using a mortgage instrument will be challenged if insurance for serious risks, fire or flood, is either not available or extremely expensive. After the insurance companies back away, the mortgage lenders will be right behind them. I read an article a bit ago that said the highest wildfire risk areas in CA saw insurance companies lose two decades worth of profits in just the last two fire seasons. And the risk is only increasing. Will be interesting as this unfolds.
Flip side, for those who are willing to pay cash and live dangerously, without insurance, there may be some great properties coming available at discounted prices. One can re-engineer a house or property to be virtually fire proof and flood protected. If money is no object and you don't mind evacuating from time to time, or hunkering down hard for a bit.
We just moved from WA state to PA in part because of fires. We lived near Seattle and while direct risk of forest fires was not an issue, the smoke that blew in from elsewhere in the state, CA, ID, OR and British Columba was an increasing issue for days and sometimes weeks in the summer, to the point that outdoor activities were near impossible due to the smoke alone.
DBoon
(22,363 posts)I'm thinking FL and TX here