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How Floods and Wildfires Will Impact 2021 Housing Market

Home prices have skyrocketed in 2020 because of high demand and low inventory. However, wildfires and floods have posed a risk to many areas of the United States. These natural disasters are likely to affect home prices in 2021 and beyond, according to a new report from Realtor.com.

The report analyzes home prices in areas prone to floods as well as areas that are at higher risk of wildfires. Realtor.com looked at price data of single-family home, condo, townhome, row-home, and co-op sales in 13 eastern seaboard states from 2010 through 2020 to get an understanding of how prices have changed in flood-prone areas. 

To analyze the impact of wildfires on home prices, Realtor.com looked at price data for the same type of homes for the same time period but in California counties. Luxury homes were excluded from the analysis. 

Over the past five years, the sale price growth of homes that are at higher risk of flooding is 5% less than the price growth of homes in similar areas but with less risk of flooding. Not every county included in the analysis has experienced slower price growth for homes at risk of floods every year. 

However, more counties in the study are having at-risk homes’ prices increase slower today than in previous years. In 2014, 33 of the 78 counties in the analysis had high-risk homes appreciated slower than those with less flood risk. By 2019, this was the case in 40 counties. It is likely that home properties will continue to experience slower appreciation for years to come. 

Homes that are at higher risk of wildfires have also experienced slower price growth. These homes have had a price growth that is 3% less than homes that are not in wildfire-prone areas. The report also shows that between 2014 and 2019, California home prices within a 1-mile radius of historical fire perimeters rose by 32%, compared to 35% for other residential properties in the same county.

This recent trend of slower home price growth for properties at a higher risk of wildfires will also likely continue in the future. Prices for homes located in historically fire-prone regions rose by 2.9% year-to-date in 2020 over 2019. This is less than the 5.2% increase for homes not at risk of wildfires.

"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," Realtor.com’s Chief Economist, Danielle Hale, said in a press release.

She added: "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."

About Author: Cristin Espinosa

Cristin Espinosa is a reporter for DS News and MReport. She graduated from Southern Methodist University where she worked as an editor and later as a digital media producer for The Daily Campus. She has a broadcast background as well, serving as a producer for SMU-TV. She wrote for the food section during her fellowship at The Dallas Morning News and has also contributed to Advocate Magazine and The Dallas Observer.
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