No Big Surprise – Natural Disasters Reduce Home Values
Evidence Shows Home Values Increase Less In Areas With Natural Disasters
Attom Data Solutions compiled data on average home prices between 2007 and 2017. Home prices in low natural disaster risk areas rose faster than homes in high risk areas.
Natural disaster included in the study were floods, hurricanes and wildfires. Now lets be clear, 2007 was the year home prices peaked in most U.S. cities. In many locations, home prices have not yet recovered to those peaks.
So market conditions in high risk areas for natural disaster may be a factor. But the data shows, home prices in high risk areas for natural disaster increase less.
Now here is some good news. Arizona has a low risk for natural disasters. Low but not zero when it comes to wildfires. They occur every year. But in the more remote areas of northern Arizona. And there are other pros and cons about living in Ariozna, natural disasters should not be one of them.
Average Home Value Appreciation In Natural Disaster Areas – Flood Risk
Attom Data looked at the annual change in home prices and sales across 3,397 cities around the country. The cities were then categorized into five groups. Each group based on the exposure to various types of natural disasters.
What they found suggests the threat of natural disasters have an effect on homes values. On average, home prices for all cities increased 7.3 percent between 2007 and 2017.
That figure masks deep drops in high risk areas. While the risk of a natural disaster in not the only factor for home buyers, it is a factor.
But there is “evidence real estate consumers are responding to natural disaster risk”. Quoted Daren Blomquist, Attom Data’s senior vice president.
Average Home Value Appreciation In Natural Disaster Areas – Hurricane Risk
That’s because home buyers weigh the risk of a natural disaster against an amenity they want. For example, living in a coastal area or near a forest.
Lifestyle often trumps natural disaster in the end. But it appears home buyers are starting to have a greater awareness of the risks.
So states Carolyn Kousky at Wharton.
Kousky said. “The tricky part is that some of the riskiest areas are also such high amenities.”
For example, Key Biscayne, Florida. Home values in Key Biscayne were 19 percent higher in 2017 than 2007. Despite the island’s flood risk.
Another area is Aromas, California. Home values increased 43 percent over the 10 year period from 2007 to 2017. Although the area offers natural beauty, it also has a very high wildfire risk.
Is the value worth the danger? It appears so. But the data suggest those areas are becoming the exception.
But in California, another factor may offset the risk. Location.
Aromas is less than an hour from San Jose, Cupertino and Sunnyvale. The heart of silicon valley.
Average Home Value Appreciation In Natural Disaster Areas – Wildfire Risk
Another string of disasters might speed the process. Jesse Keenan, who teaches at Harvard University. His focuses is on the effect of natural disasters and climate change on the housing market.
Keenan said that connection is becoming stronger. More and more Americans live through storms, floods or wildfires. “People have actually observed these phenomena,” Keenan said. “There’s been a lot of recent experience.”
Asaf Bernstein, is a professor at the University of Colorado at Boulder. He has studied the drop in home prices associated with sea-level rise. He recently said it’s not surprising that climate risk effects home values. “It’s not a question of if,” Bernstein said. “It’s a question of when.”
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