If you want to see where the real estate market is headed in light of climate change and sea level rise, watch lenders and insurers. Why? They have to be forward looking to protect their investment.
With that in mind, a research brief published this month by Freddie Mac, a governmental-sponsored company that backs mortgages, should sound a wake-up alarm to real estate buyers and owners in Coastal Florida (and across the country). In the piece, titled “Homebuyers in Coastal Florida are Not Factoring Sea Level Rise Risk into Home Prices”, Freddie Mac reported that prices are not being discounted for properties that are in sea level rise (SLR) exposed areas not within FEMA-designated floodplains. In fact, researchers found buyers of a primary residence, individual investors, and institutional investors were paying a 3.5% price premium for these homes.
Freddie Mac also reported that homes located in areas vulnerable to sea level rise experienced price discounts after hurricane flooding likely because buyers perceived a heightened flood risk rather than due to the risk of sea level rise itself.
“We conclude that homebuyers either lack awareness of SLR risk or consider it a long-term risk that will not be a concern during the time they own a home,” the researchers said.
Freddie Mac is concerned that the failure to consider the threat sea level rise poses to a property now could eventually lead to sea level rise-driven price drops later when (and if FEMA) updates its flood maps to reflect sea level rise flooding. The researchers say Florida’s housing market, with its large share of vulnerable properties built at very low elevation, could be significantly impacted.
This is yet another example of why owners and buyers of coastal property need to assess the risk posed by sea level rise flooding to make informed decisions and protect their financial futures.