![]() ![]() “If there is a big event that makes everyone suddenly pay attention to flood risk, that value can disappear really quickly,” Hino says. In the past, Hino says, housing markets have swallowed information about flood hazard very suddenly, often after a real-life flood makes it real for homebuyers. And the federal National Flood Insurance Program is broke, meaning they will likely consider raising insurance rates in the future, which would further add to the costs of the homes in this study. Flooding will almost certainly become more widespread as the planet warms and oceans rise. Perhaps most importantly, the study only looked at flood risk and flood insurance as they exist now. Some of the nation’s most flood-prone regions, including coastal South Carolina and south Louisiana, weren’t included because of the lack of maps. And it only included counties where digital floodplain maps are available (in others, the maps are kept on paper). For one thing, the analysis only examined single family homes, not the entire real estate market or even the housing market alone. The $44 billion should be thought of as a lower bound, Hino says. However, there also might be more nuances that case studies are able to account for that national studies miss.”įor instance, she wrote, three percent of tax parcels misclassify the flood risk of a property. But, she wrote over email, “the results from case studies might not be representative at the national scale. Her case study on Centre County, Pennsylvania, found that buyers pay 11 percent less for a home in the floodplain. ![]() Katherine Zipp, an economist at Penn State University, who has also studied home values and flood risk, notes that other research on local conditions has indicated a smaller overvaluation. “For a very important market in the US, that does not appear to be the case.” “Economists are taught to believe, and often believe, that markets are quite efficient,” Marshall Burke, an economist at Stanford and another author on the paper, said in a press release. The floodplain home prices aren’t fully accounting for the costs of flood insurance, and are therefore overvalued by about five to 10 percent, or $44 billion across the entire market. But that’s not what’s happening on the ground. “To make them essentially equivalent, you would fully insure it against flooding.”īased on that theory, a floodplain house should be cheaper than its high-and-dry equivalent by the cumulative cost of several decades of flood insurance. ![]() ![]() “If you were a buyer, and comparing a floodplain house to a house that was identical in every other way, but not in a floodplain, how would you adjust your pricing? “ Hino explains. They could then compare the actual sale price to an estimated price that fully accounted for the information about flooding. “So we just say, let’s just take this one house, and when it goes from outside to inside the floodplain, what does that do to prices?” That, she notes, is also how homebuyers are likely to assess new information about climate risks. “It’s really hard to compare one house to another house, because there are all these local factors that affect real estate prices,” says Miyuki Hino, an economist at the University of North Carolina and lead author on the research. So rather than compare the prices of houses across town from one another, the researchers focused on houses that were added to the floodplain over time. Local floodplain maps are regularly updated to incorporate better elevation data, or development that might change the shape of floods. The risk is that, as in any housing bubble, homeowners could be stuck with properties that are worth less than they paid for their mortgage. And significantly, the research doesn’t just rely on future projections of climate-driven flooding: it finds that housing markets aren’t incorporating the flooding information that’s already available. Nearly 15 million American properties are at substantial risk of flooding in the next 30 years, and more than three million are almost certain to be underwater at some point in that time.īut according to recent research, homebuyers may not know what they’re getting into when they buy houses in floodplains, leading them to overpay-to the tune of at least $44 billion. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |