How Climate Risk is Shaping Home Buying Trends

Does this fit within our budget? What does the floor plan look like? What would be our commute time to the office? Does the neighborhood have good schools? 

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These are some of the questions that homeowners consider before investing in one of their biggest lifetime purchases.

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Real estate website Zillow surveyed nearly 12,000 prospective homebuyers between April and July 2023. Their findings indicate that the majority of people in each region of the U.S. are considering one more factor apart from the usual ones when shopping for a home: climate risk.

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Younger home buyers are considering climate risk

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In August 2023, Hurricane Idalia caused widespread destruction in Florida, resulting in $20 billion in damages. During the same month, devastating wildfires in Hawai'i destroyed thousands of buildings, estimated to be worth $3.2 billion.

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Due to the massive underwritings associated with natural disasters, many insurers are withdrawing from states like Florida. As a result, obtaining insurance for homeowners has become more expensive.

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This would get even worse as the climate crisis is leading to an increase in the frequency and severity of natural disasters such as heatwaves, flooding, and wildfires.

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Prospective home buyers are taking these factors into consideration. According to Zillow's Consumer Housing Trends Report, 4 out of 5 buyers are considering factors like flood risk, wildfires, extreme temperatures, hurricanes, and drought.

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Millennial and Gen Z shoppers are particularly likely to factor in climate risk when making their purchase decisions.

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Regionally, residents in the Pacific states of Washington, Oregon, California, Alaska, and Hawai'i are most likely to consider climate risk as highly impactful in their home search, followed by those in the Northeast.

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Despite their search for sustainable homes, buyers are still moving into areas with high climate risk

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In July 2023, Phoenix experienced a record 31 consecutive days of temperatures exceeding 110 degrees F. Despite this extreme heat, Maricopa County, which contains Phoenix, has been one of the fastest-growing counties in the U.S. since 2017.

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While insurers are moving out of Florida, the state is experiencing a population boom.

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According to Zillow's report, only 23% of homeowners said they were considering moving to an area with less climate risk, while another 27% said they were considering an area with more climate risk.

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These ironic findings coincide with another report released by Redfin in July 2023, which found that more people are moving to a riskier place rather than a less risky one. The report concluded that 384,000 more people moved into flood-prone areas than out of them in 2021 and 2022, and 446,000 more moved into fire-prone locations.

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There could be only one explanation for this seemingly illogical decision-making: affordability. With soaring home prices across the country, it makes sense that home shoppers prioritize affordability over climate risks.