We are now seeing a pricing signal from climate change in the relatively depressed prices for the coastal property most at risk for flooding, as Harvard real-estate professor Jesse Keenan told the Wall Street Journal Friday.
Keenan is the lead author of a new study of Miami single-family homes that found the “rates of price appreciation in the lowest elevation” homes “have not kept up with the rates of appreciation of higher elevation” homes since about 2000 (see chart). That is, the homes along Miami’s coast most at risk from climate change are seeing their value drop over time compared to homes less at risk of flooding.
A second, broader study, Disaster on the Horizon: The Price Effect of Sea Level Rise, found that “Homes exposed to sea level” are being priced 7 percent lower than homes that are the same distance from the beach, but that are less exposed to flooding.
The study, which used Zillow data from around the country, concluded that the pricing gap between riskier homes and safer homes was being driven by the “more sophisticated investors.” For that group, the gap is about “11 percent and has increased over time, coinciding with the release of new scientific evidence on the extent and timing of ocean encroachment.”
The trillion-dollar coastal property bubble is ready to burst
The economic risks from rising seas are enormous — but the Trump administration’s policies all but guarantee a worst-case scenario plays out.
A 2014 Reuters analysis of this slow-motion disaster calculated there’s almost $1.25 trillion in coastal property whose value is being propped up by the National Flood Insurance Program’s below-market rates.
“The risk will rise as sea levels rise, and when that happens, you’d expect your property value to fall,” as Lloyd Dixon, the director of the RAND Center for Catastrophic Risk Management and Compensation, explained in October. “At some point, the property becomes worthless.”
Moreover, the latest science and politics are both ominous. On the one hand, the Trump administration’s policies — to abandon the Paris climate deal while working to gut both domestic climate action and coastal adaptation programs — make the worst-case climate scenarios more likely while undermining efforts by coastal communities to prepare for what’s coming.
On the other hand, the latest science makes clear such policies will destroy every last bit of U.S. (and global) coastal property in the coming decades. That science was recently reviewed by scientists from 13 federal agencies in November’s National Climate Assessment (NCA), which the Trump administration reviewed and cleared before releasing.
Read more at The Trillion-Dollar Coastal Property Bubble Is Ready to Burst, per New Study
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