Climate change is going to make buying a home even more expensive
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Buying a house these days is not cheap. Case-Shiller national home price index numbers were released Tuesday, telling us average prices in big American cities.
The index posted an annual gain of 19.7% in July, the highest rate of appreciation since the index was launched in 1987.
The Mortgage Bankers Association also put out a report recently — one that says climate change will likely increase insurance premiums and loan interest rates. That means the cost of getting your hands on that house might go up even more.
Our homebuying system is complicated. It distributes the risk of investment to a bunch of parties. Sean Becketti, who wrote the study for the MBA, said identifying those interested parties is the first line of inquiry.
“Who are all these stakeholders and what risks are they most likely to be in the forefront on?” he said.
So you’ve got the homeowners, the insurers, governments, even private investors — those hedge funds that gobble up mortgages as part of their portfolios. Then, there are the lenders.
This raises the next question: “Will banks continue to be willing to make 30-year fixed-rate mortgages?” said Matthew Kahn, professor of environmental economics at the University of Southern California.
If lenders won’t do that because of the risk of natural disaster, “people are going to have to make larger down payments and larger mortgage payments, and that will reduce their purchasing power,” he said.
It would also change where we buy homes.
“We just won’t be able to live everywhere where we currently live, and the new housing that we want to develop is going to need more infrastructure. And that just means everything’s going to be more expensive,” said Jesse Keenan, who teaches real estate at Tulane University in New Orleans.
Cities that lose population because of climate migration will have fewer taxpayers and less revenue. That loss has consequences, said Rhiannon Jerch at Temple University.
“When a city is compromised in its ability to provide goods and services, I think the people that are really suffering are going to be lower-income people for sure,” Jerch said.
Cities will have to decide between investing in climate resilience infrastructure and other goods and services, she said — all while funds are drying up.
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