Much has been reported on homeowners' pandemic-year migration trends, mainly that they are leaving expensive coastal areas for more affordable locales. But a subset of home shopper is seeking out that expensive beachfront property they've always wanted, and, not only are these homebuyers taking on more risk, they also are paying much higher prices than homebuyers in areas at less risk of flooding.
This is according to a Q1 Redfin report, which showed the median sale price of homes with high flood risk was $402,010 in the first quarter of 2021, compared with $353,783 for homes with low flood risk. Since 2013, homes with high flood risk have sold for about 7% more than homes with low flood risk on average, Redfin reported, likely because many of them are luxury waterfront properties.
"Americans are buying the beach houses they always dreamed of because they have the flexibility to work from wherever they want," said Redfin Senior Economist Sheharyar Bokhari. "While flood risk is intensifying in many parts of the country, it doesn't seem to be a deal-breaker for a lot of homebuyers. This may be because buyers aren't aware they're purchasing a home in a flood plain or just don't view it as an immediate danger. Places with high flood risk are also often home to large concentrations of retirees, many of whom don't see climate change as a threat they need to worry about in their lifetime. Florida is one example."
While home prices and sales growth are both higher for high-risk homes, homes with low flood risk are more likely to fetch more than their owners ask for.
In the first quarter, 47.2% of low-flood-risk homes went for more than they were listed for, compared with 37.4% of high-flood-risk homes. That 9.8-percentage-point gap is the largest on Redfin's record, dating back to 2013.
Places that are prone to flooding are also seeing stronger growth in home sales. Sales of high-flood-risk homes rose 18.6% year over year in the first quarter—about double the 9.6% gain in sales of low-flood-risk homes.
Properties with low flood risk typically cost less than properties with high flood risk because they’re less likely to be on the beach with waterfront views, one Redfin agent explained. "Because low-risk properties are more affordable, they face more competition, which means buyers are more likely to bid up the prices."
A study we covered last week from CoreLogic estimated some 8 million homes with more than $1.9 trillion in reconstruction cost value are at risk of storm surge damage in 2021.
Other research has shown that many homebuyers consider flood risk when looking for a home, and one in five homeowners has invested in making their home more resilient to flooding, according to another Redfin survey.
The full Redfin analysis can be found at Redfin.com.