Last Updated on March 27, 2023 by Luke Feldbrugge
A home buying checklist is essential if you plan to be successful on your quest for homeownership. And, believe it or not, one item increasingly making its way onto the list is the risk of climate change on your home purchase decision.
Climate Change Risk
The Consumer Financial Protection Bureau recently published an article highlighting just how much damage climate-related catastrophes have had on housing and why it should be featured on your home buying checklist.
In the news, some homebuilders are facing criticism for building in areas considered at high risk for climate change-related environments, such as flash flooding and chronic drought.
In another example of climate change risk, Arizona’s potential homeowners need to consider the state’s severe water shortage before picking where in the state to buy a home. The New York Times also said homebuilding was halted in Oakley, Utah citing extreme and sustained environmental conditions.
“Across the Western United States, a summer of record-breaking drought, heatwaves and megafires exacerbated by climate change is forcing millions of people to confront an inescapable string of disasters that challenge the future of growth,” the NYTimes writes.
Homeowner Costs Due to Climate Change
Insuring your new home against climate risk will help pay for damages in the event of an environmental incident, but that coverage comes at a higher cost to you.
In fact, the CFPB states that nearly 4.3 million residential homes had a substantial flood risk. For these properties, annual losses per property were estimated at $4,694, growing to $7,563 by 2051. In other states, fire risk is a significant factor, with an estimated 4.5 million U.S. homes at high or extreme risk, according to Verisk Analytics.
Here’s the fallout of how these estimates could impact your bottom dollar. The National Flood Insurance Program has a new program – Risk Rating 2.0 – that went into effect on Oct. 1, 2021. Flood insurance policies are set to increase for homeowners that live in high-risk areas. Rates can grow as much as 18% each year.
Rising costs are also a factor in areas at high risk of wildfires. ValuePeguin says that homeowners impacted by fires can see insurance rates climb as much as 27%. Colorado, where the impact of wildfires is severe, is the most expensive state for home insurance after a fire.
The bottom line is that climate change risk is a genuine threat and can considerably impact your spending power when it comes to buying a home.
Better Climate Risk Modeling
Today, better climate risk modeling makes it easier for a homeowner to determine their properties’ exposure and risk of climate events. Some tools you can use that the CFPB outlines are:
- FEMA National Risk Index
- NOAA Sea Level Rise Viewer
- USDA Wildfire Risk to Communities
- Flood Factor Flood Tool
- Climate Check
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