Climate change factors into majority of home buying decisions: survey

The increasing power and frequency of natural disasters are weighing more heavily on borrowers’ decisions regarding where to live.

A 78% share of buyers and 84% of sellers said that concerns about extreme weather events factored into how they chose the location of their next home, according to a Realtor.com survey of over 3,000 consumers conducted in July. Overall, 47% of homeowners are more concerned about natural disasters now than they were five years ago, 44% said their attitudes haven’t changed over that period and 9% are less concerned.

Among recent home buyers, 72% of millennials expressed concern, followed by 66% of Generation X, 58% of Generation Z, 55% of baby boomers and 44% of the silent generation. (The survey’s results were weighted for age and other factors in order to align them with their actual demographic proportions in the population, Realtor.com noted.)

Tornadoes were of greatest concern, as 39% of survey respondents worried about them, 38% were primarily concerned with severe winter storms, 35% said floods, 29% said hurricanes, 21% said earthquakes and 17% said wildfires. A separate report from Wells Fargo showed 71% of Americans don’t have a detailed emergency plan for natural disasters. Among them, 40% haven’t thought about making one while 16% said they don’t know how to prepare.

In areas accustomed to frequent major weather events, some lenders bring risk and loss mitigation to the forefront when working with clients. Andy Davis, CEO and loan originator at D&V Home Mortgage in Fort Myers, Fla., partners with insurance providers who are familiar with the market and know what to do in the event of a disaster.

“I actually feel like 100% of home buyers that relocate to Florida take natural disasters, mainly hurricanes, into account and rightfully so,” Davis said in a statement to NMN. “A lot of home buyers don’t take insurance seriously until they need it, but our goal is to get them to contact the agent so they know all their options.”

Natural disasters caused $156 billion in property damage from 2015 to 2019, more than doubling the $70 from 2010 to 2014, according to a study from Neighbor Who. From 1995 to 2019, Texas led all states by accruing $134.7 billion in property damage, followed by $84.9 billion in Louisiana and $62.6 billion in Florida. However, those totals could continue to rise going forward.

In the beginning of September, Hurricane Ida touched down in the Gulf Coast as a Category 4 and early estimates projected over $20 billion in damages. It then made its way up the eastern seaboard as a tropical storm and brought up to $24 billion in flooding losses.

As policymakers place greater focus on the impact of environmental disasters on housing, the mortgage industry is increasingly facing pressure to develop risk models that factor such events in. At the start of 2021, the Federal Housing Finance Agency sought input on how it should assess the ability for Fannie Mae, Freddie Mac and the Federal Home Loan Banks to factor in climate change risk as well as how it should prioritize that risk and whether it should impose climate stress tests on Fannie and Freddie.