Climate Change is Reshaping Real Estate
Climate change is increasingly impacting where and how we live. The U.S. residential real estate market – worth about $50 trillion – is experiencing shifts as extreme weather events become more frequent. Historically, many homebuyers flocked to sunny, affordable regions like the Sun Belt. Now, however, rising risks such as hurricanes, wildfires, floods, and extreme heat are prompting both buyers and investors to rethink location-based decisions. Areas once considered desirable are seeing higher insurance costs and new concerns, while traditionally overlooked regions with milder climates are gaining appeal as climate-resilient markets.
Rising Insurance Costs and the Price of Climate Risk
One immediate effect of climate change on real estate is the surge in insurance costs. In high-risk coastal and wildfire-prone areas, homeowners’ insurance premiums have skyrocketed, sometimes outpacing mortgage payments. For example, from 2013 to 2022 the portion of a mortgage payment going to insurance climbed from around 7% to over 20% on average (https://ruralhome.org/falling-property-values/). In cities like Miami and Tampa, insurance premiums have doubled or tripled in the past decade. Many insurers are even pulling out of certain markets or refusing to underwrite new policies due to the elevated risk. The result is that the true cost of homeownership in vulnerable regions is rising sharply, which in turn pressures home values. Buyers and lenders are factoring these higher ongoing costs into home prices, effectively “repricing” properties based on their climate risk profile.
According to First Street Foundation’s recent report, by 2055 as much as 84% of U.S. homes could lose some value because of escalating climate risks and insurance pressures (https://www.businessreport.com/article/how-climate-change-could-wreak-havoc-on-the-us-housing-market). They estimate a potential $1.47 trillion in cumulative property value loss nationwide by mid-century if current trends continue. This trend is already visible: neighborhoods facing repeated flooding, wildfire threats, or hurricane damage are seeing buyers hesitate and prices soften. In contrast, homes built or retrofitted with resilient features (like reinforced roofs or elevated foundations) may hold value better and even command a premium, as they mitigate some risk and insurance costs.
Climate Migration: Shifting Where Americans Move
Climate change is not only affecting costs – it’s also beginning to redirect migration patterns. Regions like coastal Florida, the Gulf Coast, and parts of California that boomed in past decades are now experiencing a reckoning with their exposure to storms, sea-level rise, and wildfires. Populations are increasingly aware of these dangers. A landmark analysis by First Street Foundation projects that over 55 million Americans may voluntarily relocate by 2055 to areas less vulnerable to climate hazards. This “climate migration” is already underway in subtle ways: some families are choosing to move out of hurricane alleys or drought-stricken areas and seek safer ground inland or in cooler climates.
The consequences for property markets are profound. Neighborhoods are expected to diverge into different trajectories based on climate outlook. Many coastal and fire-zone communities risk entering a cycle of climate-induced decline – where higher insurance and maintenance costs plus recurring disasters drive residents away, leading to falling home values (what some analysts term “climate abandonment”). On the other hand, a smaller segment of communities will be seen as relative safe havens, with strong long-term viability – these are the coveted climate-resilient markets. Identifying which areas fall into this latter category is becoming a key consideration for investors, developers, and homeowners alike.
Climate-Resilient Markets Come Into Focus
So, which regions are considered more climate-resilient? Broadly, inland areas with fewer extreme weather events and ample resources (like freshwater) have an advantage. In the United States, the Midwest stands out. In fact, in the latest Wall Street Journal/Realtor.com Housing Market Index, 12 of the top 20 emerging housing markets were in Midwestern metro areas – a reflection of their affordability and lower climate risk. The Midwest as a whole experiences fewer hurricanes, has no coastal sea-level threat, and generally faces less wildfire risk than the West Coast. While these areas aren’t immune to all hazards (for instance, parts of the Midwest can have severe thunderstorms or occasional tornadoes), the relative risk is lower, giving buyers peace of mind when making a long-term home purchase.
Some specific climate-resilient markets that have been attracting attention include mid-sized cities in the Midwest and Northeast. For example, **Ohio** had multiple cities (such as Canton and Akron) ranking among the nation’s hottest markets in recent WSJ/Realtor.com reports, thanks in part to low natural disaster risk. Other markets like Milwaukee, Wisconsin and Minneapolis–St. Paul, Minnesota boast strong economies and relatively low climate risk profiles. Even smaller metros like Kalamazoo, Michigan or Fort Wayne, Indiana are drawing interest as places where homebuyers can get more house for the money without the worry of hurricanes or wildfires. These areas tend to have just a small fraction of properties exposed to climate-related damage (on average, the top 20 markets had only ~3.7% of homes at risk of climate damage, versus much higher shares in coastal Florida or California) . For buyers seeking long-term stability, these “safe haven” markets offer a compelling combination of lower risk and lower cost.
Homebuyers Prioritize Resilience Features
It’s not just about location – homebuyers are also looking closely at the resiliency of the homes themselves. A growing number of buyers now factor climate resiliency into their home purchase decisions. According to Zillow’s latest Consumer Housing Trends Report, an overwhelming majority of buyers (over 80%) consider at least one climate-related feature to be important in a home . In surveys, buyers rank the following features highly:
- Water-tight construction: Windows, doors and roofs that effectively prevent water intrusion (very important to 72% of buyers).
- Wind-resistant design: Reinforced doors, windows, and structural elements to withstand high winds (61% very important).
- Fire-resistant materials: Use of fireproof or non-combustible siding, roofing, and insulation (59% very important).
- “Climate-proof” home: Overall design or upgrades to make the home resistant to various climate threats (57% very important).
Additionally, many buyers say that climate risks influence where they shop: for instance, about 43% of recent buyers actively avoided flood-prone areas when choosing a home. A significant share also steered clear of regions known for wildfires, extreme heat, or hurricanes. The message is clear: today’s home shoppers are factoring in tomorrow’s climate. Features like elevated foundations, hurricane shutters, backup generators, and proper drainage systems can not only protect a property but also make it more attractive at resale. Sellers and developers are responding by highlighting these resilient features in listings. In coastal markets, new construction homes advertise things like impact-resistant windows and raised construction above flood elevation; in wildfire zones, fire-resistant roofing and cleared defensible space are selling points. Even in markets with lower risk, buyers find peace of mind (and potential insurance savings) in homes built to better withstand whatever Mother Nature might throw at them.
Building a Resilient Real Estate Future
The drive toward climate-resilient real estate is only expected to strengthen. Local governments and industry professionals are starting to adapt: some cities are updating building codes to mandate stronger resiliency in new construction, and investors are increasingly using climate data to inform acquisitions. For individual homeowners and buyers, the takeaway is to be mindful of climate risks just as you would consider school districts, commute times, or property taxes. A balanced approach – one that weighs both the charms of a location and its environmental risks – will be crucial in the years ahead.
Fortunately, the market is responding with innovation. Insurance companies are incentivizing mitigation (for example, offering discounts for fortified roofs or fire-resistant landscaping). Tech firms are providing detailed flood and fire risk maps accessible to consumers. And sustainability features that double as resilience (solar panels with battery backups, rainwater harvesting, etc.) are becoming more mainstream, adding value to properties.
In summary, climate change is prompting a paradigm shift in real estate. The most climate-resilient markets – often those in historically stable climates – are emerging as winners, while high-risk areas reckon with new challenges. Homebuyers are more informed than ever and are seeking out not just dream homes, but safe homes. By prioritizing resiliency, whether in choosing where to live or how to build, we can help “future-proof” our investments and communities against the storms on the horizon.
Building a Resilient Real Estate Future
The drive toward climate-resilient real estate is only expected to strengthen. Local governments and industry professionals are starting to adapt: some cities are updating building codes to mandate stronger resiliency in new construction, and investors are increasingly using climate data to inform acquisitions. For individual homeowners and buyers, the takeaway is to be mindful of climate risks just as you would consider school districts, commute times, or property taxes. A balanced approach – one that weighs both the charms of a location and its environmental risks – will be crucial in the years ahead.
Fortunately, the market is responding with innovation. Insurance companies are incentivizing mitigation (for example, offering discounts for fortified roofs or fire-resistant landscaping). Tech firms are providing detailed flood and fire risk maps accessible to consumers. And sustainability features that double as resilience (solar panels with battery backups, rainwater harvesting, etc.) are becoming more mainstream, adding value to properties.
In summary, climate change is prompting a paradigm shift in real estate. The most climate-resilient markets – often those in historically stable climates – are emerging as winners, while high-risk areas reckon with new challenges. Homebuyers are more informed than ever and are seeking out not just dream homes, but safe homes. By prioritizing resiliency, whether in choosing where to live or how to build, we can help “future-proof” our investments and communities against the storms on the horizon.
