Severe Weather Threatens Over $12 Trillion in US Home Value, Impacting Over 25% of Properties

More than a quarter of homes across the U.S. are vulnerable to a severe or extreme weather risk like flooding, hurricane winds, or wildfires, amounting to about $12.7 trillion worth of homes in danger of weather damage, per a new Realtor.com report.

Metro areas with a higher risk of flooding or damage from hurricane winds are concentrated in the Southeastern U.S., while wildfire risks are more spread out along the West coast in states like California, Colorado, and Arizona.

The severe weather risks impact many factors about living in those areas, but they can especially add to the costs of home insurance. Some areas that are especially vulnerable, like Miami and New Orleans, have the highest ratios of insurance premiums to home value in the country, Realtor.com found. Data previously analyzed by Investopedia shows that home prices typically rebound in an area hit by a natural disaster within three years.

Flooding and Hurricane Risks Geographically Linked, Raising Insurance Premiums

The study found that just over 6% of homes in the U.S. worth a combined $3.4 trillion face a severe or extreme risk of flood damage, while 18.3%, or $8 trillion worth, are at risk of being damaged by hurricane winds. Of the five metro areas with the highest median ratio of insurance premiums to the value of a home, four were in Louisiana or Florida, each with high wind damage or flooding risk. The fifth metro is in Oklahoma.

Realtor.com said that about 2 million people may be surprised to learn that their home could be included in the flood estimate, as special flood hazard areas designated by the Federal Emergency Management Agency (FEMA) don’t include areas likely to receive heavy rainfall or be impacted by future climate change.

Areas that are at severe or extreme risk of hurricane wind damage are also concentrated in the South and on the East coast, which, combined with the flood risk, are making home insurance increasingly expensive and hard to find. The study defined homes with severe or extreme risk as homes that are likely to see hurricane winds of 51 miles per hour or higher over the next 30 years.

“Climate risk and insurance are not usually a top consideration for home shoppers balancing budgets against still-high home prices and mortgage rates, but these factors already shape ongoing housing costs and affordability, and increasingly whether they can secure affordable insurance coverage,” Realtor.com Chief Economist Danielle Hale said in the press release. “While the types of risk vary by region—flooding in the Northeast, wildfires in the West, and hurricanes in the South—the financial consequences are increasingly national in scope.”

Wildfire Risks Especially Prevalent in California

Some 5.6% of homes, worth more than $3 trillion, were found to be at severe or extreme risk of wildfire damage, which the study defined as having a greater than 14% chance of being in a wildfire over the next 30 years.

Just under 40% of that group of homes is concentrated in California, with Realtor.com finding that nearly hundreds of billions of dollars of property is at risk in expensive metros like Los Angeles and San Francisco.

A range of insurers have raised prices or stopped offering certain types of insurance to people in especially climate-threatened areas, sharply increasing demand for California’s state-run FAIR Plan that was intended to be a last resort for coverage.