Buying a home has always been a complex undertaking. Price, location, amenities, and mortgage rates are just some of the factors that prospective buyers must consider. However, according to a recent study conducted by Zillow, climate risks have also become a significant consideration for home buyers.
As per the study, over 80% of prospective buyers now take climate risks into account during their home shopping. Among these risks, flooding emerges as a top concern. In fact, nearly half of the respondents (49%) stated that climate risks were “very or extremely impactful” in their decision-making process when it comes to purchasing a home. On the other hand, 28% said these risks were either not a factor or had little significance in their decision-making.
Interestingly, the study reveals that younger home buyers, specifically millennials and Gen Z, who constitute 54% of all home buyers, prioritize climate risks while looking for a new home. Nevertheless, even a majority of baby boomers consider at least one climate-related risk, such as flooding, when searching for a property.
According to Manny Garcia, the senior population scientist at Zillow, “While all generations juggle trade-offs like budget, floor plans, and commute times, younger home shoppers are more likely to face another consideration: They want to know if their home will be safe from rising waters, extreme temperatures, and wildfires.”
Amid Mounting Concerns
It is worth noting that some of the concerns regarding climate risks are rooted in common homeowner considerations. No one wants to purchase a house that easily floods during storms. However, it is essential to recognize that these worries come at a time when many Americans are increasingly concerned about the impacts of extreme weather events and climate change as a whole.
This past summer witnessed scorching heat waves that shattered temperature records in various cities and states, further escalating these concerns. Additionally, obtaining homeowners insurance has become more challenging and expensive in certain areas. For example, in California, insurance companies are reducing their exposure to the high-risk state prone to wildfires. Similarly, in Florida, the cost of homeowners insurance has surged by 100% in the past three years due to costly storm damage and litigation expenses. The average cost of homeowners insurance in Florida now stands at approximately $6,000—more than triple the national average, according to the Insurance Information Institute.
As individuals navigate the complex process of buying a home, climate risks are increasingly influencing their decision-making. With the potential for rising waters, extreme temperatures, and more frequent natural disasters, it is evident that home buyers are now factoring climate resilience into their search for a safe and secure abode.
Water Shortages and Climate Risks Impacting Home Buyers
Water shortages and climate risks are becoming increasingly concerning for homeowners in Arizona. New approvals for developments in the Phoenix area have been temporarily paused due to fears that the region may not have enough water to meet demand over the next century.
According to Zillow, climate risks are a more significant consideration for home buyers in the drought-prone West compared to those in the South. Around 59% of home buyers in the West believe climate risks have a “very or extremely impactful” effect, while only 43% of buyers in the South share this sentiment.
Although climate change is becoming a more prominent factor, the cost of a home remains the most critical consideration for buyers. Many Americans have been relocating from high-cost states like California and New York to states with more affordable housing prices such as Arizona, Texas, and Florida. However, this trend may change in the coming years.
Zillow’s Garcia states, “Housing affordability remains the defining feature of the housing market, influencing where and how much a buyer can afford. Regions prone to wildfires and hurricanes may experience even greater erosion of affordability if insurance premiums rise or if insurance companies decide to leave the market.”
Zillow recently conducted a survey consisting of nearly 12,000 prospective buyers between April and July 2023, asking for their opinions on considering climate risks when choosing a home. While the survey did not analyze price ranges, Garcia highlights that most respondents expressed no interest in buying a home outside their current region. This finding suggests that we have not yet reached a tipping point where a significant number of people are actively seeking different markets to avoid climate risks.
Zillow will release their full housing trends report later this year, further detailing the results of this survey. As water shortages and climate risks continue to be significant concerns for homeowners, it remains to be seen how these factors will shape the future real estate market.