Natural hazards are good at grabbing headlines, but they aren’t as good as dissuading people from buying homes in high-risk areas, a new report shows.
Median home prices in areas that are in the top 80 percentile for risk of natural hazards have appreciated at an overall faster pace than the rest of the U.S.
Homes in these areas have appreciated 40 percent on average over the last 10 years vs. 24 percent for the nation as a whole, a report released today by property database firm ATTOM Data Solutions shows.
The authors of the report examined natural hazard risk in more than 3,000 counties and more than 22,000 U.S. cities based on the risk of six natural disasters: earthquakes, floods, hail, hurricane storm surge, tornadoes and wildfires.
The report shows the median sales price in 2018 for homes in the very high hazard risk category was $582,876 compared with $244,079 for homes in the very low risk category.
Not all risks are created equal.
Homes in areas that are more prone to earthquakes, hail and tornadoes appreciated at a higher rate than the U.S. average.
“Homes in the highest 20 percent of risk areas outperformed the market by quite a bit,” said Daren Blomquist, senior vice president at ATTOM Data Solutions.
Homes in areas with high earthquake risk over last 10 year have on average had the greatest home price appreciation at 42 percent vs. 24 percent in the overall U.S. housing market.
Explaining that requires a two-part answer.
“A lot of the earthquake-prone, high-risk areas are on the West Coast, and California in particular, and those markets have performed very well in this housing recovery,” Blomquist said. “They’re very desirable markets.”
Two of the most desirable – and most earthquake prone – counties in California are Los Angeles County, where home appreciation was 54 percent over the past 10 years, and San Francisco County, which experienced 80 percent appreciation.
The other part of the equation is that earthquakes, as well as hail and tornadoes, haven’t matched the scale of the other natural disasters as often in recent times enough to have discouraged people from buying homes in areas where those particular risks are greatest, according to Blomquist.
“You don’t see the scale of events with any of those three disasters, at least in recent years, that have actually caused the widespread catastrophic damage to homes that we’ve seen with hurricanes, floods and wildfires,” he said.
The greatest hail risk and tornado risk tends to be concentrated markets in the Midwest and Southeast, which have outperformed the nation overall in terms of price appreciation, according to the report.
The report shows that areas with the highest hail risk experienced home price appreciation of 34 percent in the past 10 years, while those with the highest tornado risk have had 25 percent appreciation, a slight but notable improvement over the overall 24 percent nationwide.
Areas where there is the highest risk of flooding, hurricane storm surge and wildfires didn’t see home price appreciation keep pace with the rest of the nation.
Price appreciation in the overall U.S. housing market was double the rate of appreciation in cities with the highest flood risk and triple the rate of appreciation in cities with the highest hurricane storm surge risk over the past 10 years, while the broader market has also outperformed appreciation in cities with the highest wildfire risk during the last decade, the report shows.
Areas with the highest risk of hurricane storm surge experienced only 8 percent home price appreciation in 10 years, while areas with the highest flood risk had only 12 percent appreciation.
Areas that were the most prone to wildfires, several of which have made headlines in the past few years for looming large across California, had an appreciation of 21 percent.
On the surface this doesn’t make sense, since price appreciation for much of California easily outpaced the nation as a whole. However, Blomquist explained that appreciation figures for wildfire-prone areas reflect that many of those places are in inland portions of the state, where home prices rose comparatively slower over the last 10 years.
Was this article valuable?
Here are more articles you may enjoy.