Home prices in US cities located in high risk, natural disaster-prone areas have grown twice as fast as prices in lower risk counties.
Over the last five years, prices have appreciated 65 percent on average in cities in the top 20 percent, or very high risk for natural hazard risk. This is compared to a 32 percent gain in very low risk counties, according to a new report released earlier this week by ATTOM Data Solutions, the curator of the nation’s largest multi-sourced property database.
Meantime, over the last decade, prices have risen 9 percent on average in very high risk cities and 3 percent in very low risk cities.
“Strong demand is driven largely by economic fundamentals, primarily the presence of good-paying jobs, although the natural beauty that often comes hand-in-hand with high natural hazard risk in these areas is also attractive to many homebuyers,” says Daren Blomquist, senior vice president at ATTOM Data Solutions, in the report.
Cities that had the highest overall natural disaster risk included: Oklahoma City, OK, San Jose, CA, Los Angeles, CA, and Seattle, WA.
Meanwhile, Philadelphia, PA, Orlando, FL, and Brooklyn, NY were among the cities with the lowest natural disaster risk.
Bucking the national trend is Florida and Louisiana, where appreciation has been slower despite being the country’s two highest flood risk states.
“A combination of relatively recent flood events that are fresh in the memory of prospective homebuyers, along with the increasing political will to change the National Flood Insurance Program, are helping to weaken demand for homes in high risk flood zones in Florida and Louisiana, resulting in weaker home price appreciation in those high risk areas,” Blomquist tells BuzBuzzNews.
The data may also suggest that consumers in some areas are starting to give more weight to natural disaster risk, especially flood risk.
Recent hurricane activity in Texas and Florida, as well as past disasters like Hurricane Katrina, have long and short-term effects on affected housing markets.
“In the very short term, the month or two following the natural disaster event, there is typically a sharp drop-off in home sales. Home sales typically recover a few months down the road, but the mix of home sales shifts to being more heavily distressed home sales,” Blomquist tells BuzzBuzzNews.
The year following an event, home price appreciation may slow or go negative due to the weight of distressed sales. But the markets are resilient and usually bounce back after a year’s time, much like New Orleans following Katrina, Blomquist adds.
Lastly, ATTOM also concluded that homeowners living in higher disaster risk cities had 11 percent more equity on average and had longer homeownership tenures compared to lower natural disaster risk homeowners.
ATTOM indexed natural hazard risk in more than 3,000 counties and 22,000 cities based on the risk of six natural disasters: floods, earthquakes, hail, hurricanes and storm surges, tornadoes and wildfires. It also examined housing trends for both single-family homes and condos.
Click here to read the entire report.