High fire risk hasn’t yet harmed home values in California cities
High fire risk hasn’t yet harmed home values in California cities
Here’s today’s shocking stat: The U.S. real estate that faces major wildfire risk is worth $9 trillion. For flood risk, it’s $7 trillion. For wind risk: $17 trillion. These numbers all come from a new climate risk analysis from Zillow. And half of the top 10 cities with the most fire-prone real estate value are in California.
California is well-represented in this analysis because, even though there’s a lot of climate risk, “there’s a housing crisis here. There’s just more people that want to live in California than there are homes to put them in right now,” said environmental economist Judson Boomhower with UC San Diego.
That housing shortage makes homes more expensive, he noted. The high fire-risk homes in Zillow’s report sold for 49% more than low fire-risk homes.
“These risks have been around for a long time. They’re getting worse,” he said. “It seems like real estate markets haven’t fully priced them in historically.”
Home insurance companies have already started to react — that’s why they’re dropping home policies in California. Home prices lag behind, because climate risk is only one factor in a home’s value.
“Many high-risk areas are desirable places to live for other reasons, like being near an ocean,” said Zillow senior economist Kara Ng.
That’s already started to change, she said. Homes with extreme fire or flood risk in the study are less likely to sell or go pending.
“These fire- and flood-prone homes do simply sell, but at a greater discount than compared to the initial list price,” Ng said.
She added that higher flood-risk homes also see more mortgage application denials and withdrawals.
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