With wildfires raging in the Northwest and hurricane season in full swing, the impact of natural disasters on residential housing and investment real estate has been top-of-mind in the last few weeks. A just-released study found that 35.8 million single-family homes and condos with a combined estimated market value of $6.6 trillion are in counties with high or very high natural hazard risk. Those 35.8 million homes represent 43 percent of the 83.4 million single-family homes and condos in all counties analyzed for the report by RealtyTrac.com. 43 percent of U.S. homes and condos with an estimated combined market value of $6.6 trillion are in counties with a high risk or very high risk for at least one type of natural disaster. 29 percent of all U.S. homes and condos with an estimated combined market value of $4.7 trillion are in counties with a high risk or very high risk for hurricanes. Home prices have increased more over last 10 years in low-risk counties for natural disasters, but home prices in high-risk counties have bounced back more quickly over the past three years. “In the interest of personal safety and protecting the value of what is likely their biggest financial asset, prospective buyers and investors should be aware of any natural disaster risk impacting a potential home purchase,” Daren Blomquist, vice president at RealtyTrac, said in the release. “There is no reason homebuyers need to be surprised with natural disaster risk information when wading through a stack of disclosures at the closing table, given the widespread availability of this data online and even through mobile apps. “In most cases, learning about natural disaster risk will not stop a home sale, but it will help buyers make a better-informed decision about where to buy and also be prepared in terms of appropriate insurance coverage and family contingency plans, depending on the type of natural disaster risks most affecting the home they end up purchasing,” Blomquist added. For the report, RealtyTrac assigned a natural disaster risk score to 2,318 counties nationwide with sufficient home value data available. Based on its score, each county was assigned to one of five risk categories for overall risk of natural disaster: Very High, High, Moderate, Low or Very Low. Similar scoring and ranking was also used to rate risk for each of the five natural disasters individually (see full methodology below). States with the most homes in High Risk or Very High Risk counties for overall natural disaster risk are: • California (8.4 million) • Florida (6.7 million) • New York (2.4 million) • New Jersey (2.3 million) • North Carolina (2.3 million) Metro areas with the most homes in High Risk or Very High Risk counties for overall natural disaster risk are: • New York (3.5 million) • Los Angeles (2.5 million) • Miami (1.9 million) • Houston (1.2 million) • Riverside-San Bernardino in Southern California (1.1 million) “The weather is beautiful in SoCal, but we are statistically more susceptible to the risk of fire, floods and earthquakes than most areas. Our agents must be articulate in explaining the higher risks to buyers. People have to be able trust their agent to fully disclose the risks of natural disasters and homeownership to allow buyers to make the most informed decisions,” said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. “A well-informed, knowledgeable buyer is best prepared to take on the potential risks associated with SoCal homeownership.” 29 percent of homes worth an estimated $4.7 trillion in counties with high hurricane natural disasters risk The report found that 24.5 million single-family homes and condos (29 percent of the 83.4 million total) with a combined estimated market value of $4.7 trillion are in counties with a High Risk or Very High Risk for hurricanes. 13 percent of homes worth an estimated $1.8 trillion in counties with high wildfire risk The report found that 10.6 million single-family homes and condos (13 percent of the 83.4 million total) with a combined estimated market value of $1.8 trillion are in counties with a High Risk or Very High Risk for wildfires. Home values higher in high risk areas, 10-year price growth stronger in low risk areas Homes in Very High risk counties for overall natural disaster risk had an average estimated market value of $170,237, and homes in High Risk counties had an average estimated market value of $191,244. Meanwhile, the average home value in Very Low Risk counties was $151,793, and the average home value in Low Risk counties was $154,464. Although average home values were higher in higher-risk counties, home price appreciation over the past 10 years was stronger in lower-risk counties. Among 551 counties with sufficient historical home price data, home sales prices in counties with a Low Risk for natural disasters increased 6.6 percent on average between 2005 and 2015, and home sales prices in counties with a Very Low Risk for natural disasters rose 9.5 percent on average during the same time period. Conversely, home sales prices in counties with a High Risk for natural disasters decreased 2.5 percent on average over the past 10 years while home sales prices in counties with a Very High Risk for natural disasters decreased 6.4 percent on average. Home price appreciation over the past three years has been stronger in higher risk counties for natural disaster. In counties with a High Risk for overall natural disaster, home prices increased 16.6 percent between 2012 and 2015 on average, while home prices in counties with a Very High Risk for natural disasters increased 20.4 percent during the same time period. Home prices in Low Risk counties increased an average of 10.1 percent over the past three years, and home prices in Very Low Risk counties increased an average of 12.8 percent during the same time period. See details on the report methodology here.
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