Climate Change, Natural Disasters, & Home Values: an Overview

By Lauren Rosales-Shepard, Content Writer

It’s impossible not to notice that extreme weather and natural disasters have increased over the past several years. From the historically severe Winter Storm Uri in Texas, which led to unprecedented loss of power across the state for days, to the destructive flooding in Florida following Hurricane Ian, described as “the second-most-costly storm to ever strike” the state, it’s obvious that something meteorological is afoot.

That something is, of course, climate change.

Warmer surface temperatures lead to more droughts, but also more intense storms. Think of the increased water evaporating into the atmosphere as powerful fuel for storm development. Plus, the escalated temperatures in the ocean and the air cause stronger winds to propel tropical storms–combine that fact with rising sea levels, and you will see more intense and widespread hurricane damage! When those higher temperatures disrupt the polar vortex, imagine an enormous leak that causes Arctic weather to bleed into traditionally warmer geographies. In short, everything goes haywire–precisely as we have seen.

We know from watching news reports that any given natural disaster can lead to displacement and loss of life; we know, too, that extreme weather affects crops. However, common knowledge tells us much less about the effect that climate change-driven natural disasters and extreme weather have on home values and other housing issues.

Home Values

According to a study of hurricanes and housing markets in Florida during the span of 2000-2016, home prices temporarily increased in the years following a hurricane. The study also found that there was a decrease in home sales during that same subsequent period–usually, about three years. This negative supply shock tended to rebound after that time, perhaps reflecting the ability for homeowners in the affected areas to obtain insurance payments or financial aid from government agencies and repair any incurred damages. As a result, the study describes, the sale prices and buyer incomes return to “baseline” levels–but not below–and so over time, more than 25% of households possess higher incomes than before the hurricane hit.

An alternate study that analyzed Hurricane Sandy’s effects on the New York City housing market found that damaged properties did suffer the big, immediate drop in value that one might imagine. Those values did enjoy a partial recovery over time, likely due to repair and restoration, like the homes in Florida described above. However, unlike the previous study, this research discovered a “price penalty” seemingly suffered by flood zone properties that were not themselves damaged by Sandy at all. The hypothesis: immense news coverage surrounding the storm may have sparked widespread awareness of the risk of flooding in that location, turning people off from purchasing homes there. It’s worth noting that the Florida study did not focus on one extreme storm, so the data were less likely to be affected by the same type of news-led notoriety. In other words, if the area is hit by a more extreme and therefore more ‘famous’ hurricane, home values are more likely to suffer, because more people will know about it.

A 2018 study reached a similar conclusion in its analysis of the 2010 Fourmile-Lefthand Canyon forest fire. At the time, the fire was the most expensive ($217 million in property damages) in Colorado history, drawing attention to the correlation between wildfires, forested areas, and economic loss in the area. Resultantly, sale prices of homes in nearby areas–though unaffected themselves–experienced a 21.7% decline. Conclusion? The area received a well-known reputation as at-risk for especially costly wildfires, and potential homeowners were not keen to take that risk.

More recently, a 2020 study considers the correlation between natural disasters, regional economic health, and home values. A robust local economy often yields higher home values; the inverse is also true. The study finds that a more diverse local economy–i.e. comprising a plethora of industries, rather than only one–is more likely to bounce back from a period of adversity, including natural disasters. Home values, in turn, reflect those shifts. For example, imagine Las Vegas. The area relies very heavily on tourism–expensive tourism. Therefore, when something like the Great Financial Crisis of 2008 happens, or the COVID-19 pandemic, and people don’t take expensive vacations, Las Vegas tends to suffer enormous economic loss. During these periods, the home values also suffered a dramatic drop. The study found that the same holds true for communities impacted by hurricanes and other natural disasters; in those with more than one thriving industry, home values suffered far less.

It might not come as a surprise, but belief in climate change also affects home values/prices. A concept called “homophily” refers to a preference for owning a home in a neighborhood where the other inhabitants are similar to oneself. You can probably see where this is going; if there is a strong desire to live in a neighborhood where your neighbors have the same political signs in their front yards, it’s pretty likely that you and those neighbors are going to have identical opinions on whether or not climate change is real. A 2020 study finds that in neighborhoods where the majority believe in climate change, if those neighborhoods are projected to be underwater in future due to rising sea levels, there is a 7% drop in home prices. Logically, it follows that in neighborhoods that maintain climate change denial, the home prices likely remain unaffected. The Scientific American suggested last month that either denying or, at least, ignoring climate change and its associated risks has inflated the property values in various flood zones–by over 40% in some areas!

Demographic Shifts

The extreme weather and natural disasters resulting from climate change do not affect everyone equally. Perhaps it’s common sense, but studies, too, show that those with lower incomes are more often unable to recover when natural disasters strike their communities. Underrepresented and otherwise marginalized groups do not have access to prevention and mitigation measures, not to mention timely recovery efforts, or financial resources to help them rebuild.

A 2022 study analyzes the homeowner response in areas affected by Hurricane Andrew in 1992, and finds that the “economic capacity to adjust” seems to rule the results. After Andrew, the most financially vulnerable tended to move into low-rent housing in the hardest-hit areas, as it was all that they could afford. Middle-income households frequently abandoned the area entirely, choosing to relocate to somewhere with less risk association. On the other hand, the wealthy most often opted to remain, due to their ability to afford increased insurance protection, costly repairs, and future protection.

An earlier 2012 study of the housing aftermath of Hurricane Andrew finds, too, that the powerful storm led to widespread property abandonment and vacancy. This result was most prevalent in neighborhoods and communities that were already in decline when Andrew hit, and the study shows that abandoned properties tend to have a “spillover effect” that, in the long term, leads to increased vacancy in the surrounding areas. Though a decade apart, these two studies of the same hurricane reach the same conclusion: low income households and communities who are affected by natural disasters are least likely to recover–ever–from those events. In fact, with the increasing occurrence of extreme weather that is triggered by climate change, it’s highly probable that these vulnerable populations will find themselves in consistently worsening circumstances due to both the likelihood of repeating hurricanes and their increasing inability to afford to move away from the area.

There is an uptick in missed mortgage payments after a natural disaster hits, a 2020 study finds. Such data may not be surprising; after all, the sudden onslaught of pricey and necessary repairs could throw virtually anyone’s monthly budget out of whack. However, the study also finds that many of these mortgage delinquencies lead to foreclosure–in other words, one missed payment evolves into too many, until there is no possible rebound. The primary residence is the largest financial asset among the majority of home-owning households, so what happens when these families lose their homes? The study postulates that pre-existing inequalities in these communities are only further widened, reflecting the long-term, big-picture damage that extreme weather events can have in affected areas.


The insurance industry is increasingly reluctant to take on homes that are at high risk for wildfire, flood, or earthquake, leaving an alarming amount of households without a natural catastrophe safety net. Don’t let that be you! If you are looking to buy a house in a potentially impacted area, don’t hesitate to think ahead about the effects of climate change. Make sure you ask inspectors to look for evidence of previous flood or fire damage, and budget for future complications and damage. And don’t underestimate the effect of extreme heat, either–some homeowners in desert locales have preemptively combatted future excessive summer temperatures with features like solar panels and heat-reflecting roofs, for example.

The future may be nebulous, but the best defense is to be informed, knowledgeable, and prepared.

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