Concerns Brew in Florida Over Concerns About Future Home Values
When it comes to buying a home in Florida, especially with the market as hot as it is, it’s often a large financial commitment. That means buyers want to know that their investment will be safe for many years to come. Unfortunately, Florida and other coastal states are among some of the most vulnerable to rising sea levels and intense tropical storms. It may seem far off into the future, but a new study published by the National Bureau of Economic Research suggests that climate change is already impacting real estate prices.
The Impact of Climate on the Florida Real Estate Market
In the study, the authors noted that there was little-to-no change in the number of homes sold in “vulnerable” Census tracts in pre-2012 Florida. Since then, home sales in vulnerable tracts have dropped, and sales of homes located in less vulnerable areas have likewise increased.
Of course, thanks to increasing popularity, low-interest rates, and an influx of out-of-state residents with novel work remote positions, values have risen across the board. Yet vulnerable homes tend to fetch five to ten percent less than their higher ground counterparts. The authors point to certain events that could have influenced the buyers - more specifically, Hurricane Sandy, which ravaged the East coast in 2012. As a result, the Intergovernmental Panel on Climate Change updated its worst-case projections a few years later, pointing to worsening impacts due to climate change.
Today, the National Oceanic and Atmospheric Administration provides a free interactive map that shows the potential risk of rising sea levels or flooding over the years to come. While it’s tempting to punt climate issues down the road as “future worries,” it’s worth considering that 30-year mortgages drawn up this year will be ending in 2051; the future comes at us swiftly, and homeowners may be the ones to pay the ultimate price.
“Homeowners and lenders face greater risk of extreme weather events, storm surges, and nuisance flooding. Our results suggest that fewer buyers are willing to bear these risks at current market prices, leading to a sharp fall in transaction volumes," the report explains. Meanwhile, others don’t take the issue as seriously. Unless significant changes to the infrastructure are made, the real estate landscape in Florida could change dramatically. Until then, keep rising sea levels and flood risk in mind as your clients definitely are.
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