The Impact of Natural Disasters on Homeownership

Natural disasters are becoming more common and more severe as a result of climate change. Very large portions of the United States are at risk of hurricanes, floods, wildfires, earthquakes, tsunamis, landslides, and tornadoes that are predicted to increase in severity and frequency in the coming years.

Homeowners affected by natural disasters are frequently deciding to move to new areas altogether. According to research from Realtor.com, 78% of homebuyers surveyed consider natural disasters when deciding where to purchase a home.

Key Takeaways

  • After a natural disaster, housing for survivors may be harder to find and more expensive in nearby areas.
  • Potential natural disasters are increasingly considered by homebuyers.
  • Natural disasters are becoming more common, more severe, and causing more economic damage.
  • After a natural disaster, homeownership rates decrease in an affected area.

How Natural Disasters Affect Existing Homeowners

Existing homeowners hit by a natural disaster are quickly faced with a very difficult situation, with hard decisions to make. Many times, they may have lost their possessions, their community, their profession—and in the worst cases, they may have lost loved ones. In these situations, they will have to piece their lives back together and potentially fight with their insurance company for coverage. Those with no loss-of-use coverage or who have inadequate coverage may find themselves unhoused and seeking housing from local disaster relief charities or the Federal Emergency Management Agency (FEMA).

34%

of recent homebuyers have considered selling their home, moving, or both over concerns about future natural disasters.

Even those with adequate coverage may find housing difficult to find. In areas with a very tight housing market and a high occupancy rate, there simply may not be enough units available to house affected people, even those with the money to pay for it. After the Marshall Fire in the wealthy Denver suburb of Boulder, Colo., burned close to 1,000 homes in December 2021, surviving residents struggled to find longer-term housing while waiting for their homes to be rebuilt.

As the housing market continues to tighten, we can expect to see similar situations after natural disasters in other densely populated high cost-of-living areas. After the 2018 fire in Paradise, Calif., rent and home sale prices increased 3% to 6% in nearby counties. That rate increase may not be affordable for many.

$148 Billion

The total cost of climate-related and weather disasters in 2021. This made 2021 the second-worst year on record, with 724 deaths across 20 events.

How Natural Disasters Affect Homebuyers

Homebuyers are increasingly concerned about the potential for a natural disaster when they are house shopping. A July 2021 survey found that 62% of homeowners are concerned about the threat of natural disasters, with the younger generations being more concerned about natural disasters (72% of millennials).

Research found that after a natural disaster, there is a 3 to 5 percentage point decrease in homeownership rates in the affected area. Households are less likely to purchase homes in an area recently affected by a natural disaster.

Are natural disasters becoming more common?

Yes. Natural disasters are becoming more common and more severe. Tornadoes, hurricanes, wildfires, and floods are all directly attributed to climate change and are expected to rise in frequency, intensity, and duration in the coming years.

What places are least likely to get hit by a natural disaster?

No place is truly safe from any type of natural disaster. Parts of the United States that are the least likely to experience natural disasters are far from the coast, high enough to avoid flooding, in an area wet enough to avoid severe wildfires, not in an area near a fault line for earthquakes, and not in an area that is prone to tornadoes. This leaves parts of the Southeast, much of inland New England, and the northern parts of the Midwest.

What places are most likely to get hit by a natural disaster?

Coastal areas like Miami, New Orleans, and Houston are the likeliest to get hit by hurricanes, storm surge, and flooding. These risks will increase with sea level rise as a result of climate change. Areas with significant risk of seismic activity, like the West Coast and Hawaii, are the most likely to be hit by earthquakes and tsunamis. The western United States, including the Rockies, is at greater risk of severe wildfires and subsequent landslides. The central United States is seeing increased tornado activity in more places than was historically common. Hundred-year floods—intense flooding events that in theory happen once every 100 years—are predicted to become annual floods in low-lying parts of the United States.

The Bottom Line

As natural disasters become more common, homeowners will have to deal with the aftermath. They likely will face difficulties obtaining housing and may choose to move to another area entirely. More homeowners are considering the potential for disasters when home shopping, which so far appear to have a moderate impact but eventually may have profound impacts on coastal housing markets and other disaster-prone areas.

Article Sources

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  1. National Wildlife Federation. “Climate Change, Natural Disasters, and Wildlife.”

  2. Realtor.com. “Natural Disasters Are Now Affecting Where Homebuyers Choose to Live.”

  3. CoreLogic. “Natural Hazards Have Unexpected Effects on the Housing Market.”

  4. Realtor.com. “Homeowners Concerned with Natural Disasters.”

  5. Tamara L. Sheldon and Crystal Zhan, via IDEAS. “The Impact of Natural Disasters on US Home Ownership,” Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), 2019, pp. 1169–1203.

  6. Federal Emergency Management Agency. “Contact FEMA for Assistance with Marshall Fire Losses.”

  7. Boulder County. “Boulder County Releases Updated List of Structures Damaged and Destroyed in the Marshall Fire.”

  8. National Centers for Environmental Information, National Oceanic and Atmospheric Administration. “Billion-Dollar Weather and Climate Disasters.”

  9. Reza Marsooli, et al. “Climate Change Exacerbates Hurricane Flood Hazards Along US Atlantic and Gulf Coasts in Spatially Varying Patterns,” Nature Communications, 2019.