Since the 1980s, the United States has experienced an average of about eight major weather events each year, causing at least $1 billion in damage.In the past five years, this number has surged to 18, and by 2023 Already viewed 23. That means the housing market faces at least a $23 billion problem that will only continue to grow as the climate continues to change. (Remember: Scientists estimate this summer has been the hottest daily temperatures in at least 100,000 years.)
But federal and local governments and private companies are working on ways to mitigate these risks and their financial impact. John Rogers, chief innovation officer at CoreLogic, a provider of information, analytics and data support services, said climate change can appear abstract and overly political, causing many homeowners to overlook and ignore climate issues. He agrees that the situation will only get worse. “Unfortunately, the severity and frequency of major weather events are likely to increase,” Rogers said.
Homeowners end up paying the price in a variety of ways. In fact, insurance companies are already fleeing what they call a “challenging” market.There is no better example than Florida and California, where insurance companies are either pulling out of those states entirely or reducing their business because wealth Previously reported.
Rogers said there are several factors at play, but the increasing frequency and intensity of hurricanes is a big factor in Florida. The situation is not far off in California, where some insurers have capped new policies or are no longer writing new policies in the state.
That exacerbates the housing-related crisis in the states, which have seen home prices rise sharply amid a pandemic-fueled housing boom, keeping many buyers away. In fact, buyer concerns about the availability and cost of insurance have slowed new home sales somewhat in Florida and California.
Still, Rogers said the investment he’s seen from federal and local governments and private companies is “really encouraging,” especially when considering financial indicators of the actual impact of climate change on the housing market. At the time of our interview, Rogers had just returned from a conference in New York. He said things had changed from “talking about climate change to taking real action across the supply chain of building homes and making homes more resilient”.
How insurance is returning to Florida and California
Changes underway include, for example, a new ordinance requiring homeowners in some areas of Florida to build five-foot seawalls to protect their homes. “Government incentives and investments will help change the dynamics of this market and bring insurance back to Florida,” Rogers said.
Rogers noted that in California, where wildfires are a major issue, lowering premiums requires meeting 12 prerequisites, ranging from clearing brush from under decks to putting up fencing 12 feet away from homes.
However, these problems extend far beyond California and Florida. Think of the winter storms across the country, Roger said.Their frequency may be quite low, but their impact is large It will definitely become more serious.
Texas case
They are affecting areas that cannot withstand catastrophic storms. Take Texas, for example. In February 2021, temperatures in the state hit record lows, roads were impassable due to ice and snow, and the state’s grid operator lost control of the power supply, resulting in power outages that lasted for several days.Numerous houses were damaged, causing Losses are expected to range from $80 billion to $130 billion. “From a homeowner’s perspective, we need to realize and understand that we need to protect our homes,” Rogers said.
This is where governments and private companies come into play. The U.S. government and federal agencies are already taking steps to reduce carbon emissions and increase household resiliency—think the Inflation Reduction Act and the Federal Emergency Management Agency (FEMA) Recently announced $3 billion in mitigation projects.
Make homes resilient
Companies like CoreLogic are also jumping on board. CoreLogic has developed a climate risk analysis model that assists companies in measuring, modeling and mitigating the financial impacts of climate change on every property in the United States. Providing a simple financial metric could help private companies and federal agencies focus while changing behaviors and mindsets around climate change to shape policy, he said. Rogers hopes this will help spur action by companies focused on anything involving the loss of money.
“Once you can measure something financially, it’s amazing how the industry develops,” he said, emphasizing the goal of protecting home ownership and the financial stability of the asset class. CoreLogic’s climate risk analysis has supported the Federal Reserve’s assessment of the climate risks faced by the country’s six largest banks.
Rogers said every $1 invested in making a home more resilient is equivalent to a $6 investment in disaster recovery after a weather event. From an economic perspective, investing in making homes more resilient makes sense. This may mean verifying that your home was built to local building safety codes, consulting with local building safety departments before starting a home repair or improvement project, lifting and anchoring utilities (such as electrical panels), or installing water source to reduce basement flooding risk sirens or working pumps, according to Federal Emergency Management Agency.
In addition to making your home physically resilient, you can and probably should get flood insurance whether you’re in a flood hazard or not high risk flood zone or not.
Doing so has never been more important. According to calculations by CoreLogic, seven of the 10 counties in the country most vulnerable to climate risks are appreciating in value. Miami-Dade County is one of the hottest real estate markets, This is also the most dangerous, due to hurricanes and flooding. Residents need solutions, and that can start with funding from governments, private companies, and even venture capitalists to ensure homes can withstand natural disasters.
“For most people, it’s the biggest investment they’ll make in their lifetime,” Rogers said. “As a homeowner, I want to know what I can do to protect my greatest asset.”
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