Realtor.com® Analysis: Risk of Flood and Wildfire Damage Likely to Impact Home Prices in 2021 and Beyond

Homes in areas at high risk of natural disasters see 5% less price growth than homes in similar areas with lower risk

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Dec 14, 2020, 06:00 ET

SANTA CLARA, Calif., Dec. 14, 2020 /PRNewswire/ -- Homes in high-risk flood areas experienced a sales price growth of 5 percentage points lower than homes in similar areas with less risk over the past 5 years. Similarly, that gap was 3 percentage points for homes in high-risk fire areas. Nationally, home prices soared in 2020 rising by double-digit percent growth since August, and while realtor.com^® expects home prices to continue rising in 2021, the pace is expected to be slower, especially for homes in areas at high risk of natural disasters.

"As the impacts of climate change and worsening natural disasters become more well-known, it's natural for home shoppers to take these factors into account when deciding the purchase price of a home, and tools that make information about these risks more available to buyers will help them make good choices," said realtor.com^®Chief Economist, Danielle Hale. "When buying a home in a flood or fire-prone area, home shoppers should budget for the added costs of home insurance, mitigation practices and potential losses, which can add to the total cost of ownership for the home."

What does this mean for homes in flood-prone areas?
Realtor.com^® analyzed flood risk data from First Street Foundation, and found that over the past five years, homes with a severe or extreme risk of flooding in 78 coastal counties that had hurricane-related disaster declarations in the study period saw a cumulative sales price per square foot growth of 25%, compared to 29% for homes with a moderate or major risk, and 30% for homes with a minimal or low risk. The impact of flood risk on home prices appears to be getting more pronounced over time. In 2014, 33 of the 78 counties studied saw high-risk properties appreciate slower than those with less at risk, while in 2019, this was true of 40 counties. The trend was most pronounced in Delaware, Florida, Massachusetts and Maryland.

The analysis also suggests that home prices are more impacted after a particularly destructive season. For example, after the 2012 Hurricane season, where Hurricane Sandy and other storms caused the most property damage in a five-year span, price growth for homes in severe and extreme risk areas fell further behind lower-risk homes.

What does this mean for homes in fire-prone areas?
Realtor.com^® found that between 2014 and 2019, the prices of homes in California within a 1-mile radius of historical fire perimeters increased by 32%, compared to 35% for other homes in the same county. The data also show that this trend has continued, as prices for homes in historically fire-prone areas increased by 2.9% year-to-date in 2020 over 2019, versus 5.2% for homes without risk. The price gap was most pronounced in Lake, Solano, Monterey, Los Angeles and Sonoma Counties over the 5-year study period.

Flood risk data is available for nearly all for-sale and off-market properties on realtor.com^®. For more information, visit: https://www.realtor.com/flood-risk/

About realtor.com^®Realtor.com^® makes buying, selling and living in homes easier and more rewarding for everyone. Realtor.com^® pioneered the world of digital real estate 20 years ago, and today through its website and mobile apps is a trusted source for the information, tools and professional expertise that help people move confidently through every step of their home journey. Using proprietary data science and machine learning technology, realtor.com^® pairs buyers and sellers with local agents in their market, helping take the guesswork out of buying and selling a home. For professionals, realtor.com^® is a trusted provider of consumer connections and branding solutions that help them succeed in today's on-demand world. Realtor.com^® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. under a perpetual license from the National Association of REALTORS^®. For more information, visit realtor.com^®.