Real Estate
Climate Change to Wipe Away $1.5 Trillion in U.S. Home Values, Study Says
Rising home-insurance costs and more homeowners spurning some risky neighborhoods will drive these declines, according to First Street
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Nicole Friedman
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Deborah Acosta
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Feb. 3, 2025 12:01 am ET
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Losses from natural disasters such as California’s Palisades fire are hitting new records. Photo: Alisha Jucevic for WSJ
Climate change will cause a $1.47 trillion decline in U.S. home values by 2055, according to a new study from climate-research company First Street.
Rising home-insurance costs and more homeowners spurning some risky neighborhoods will drive these declines, First Street said.
The study is an attempt to quantify the economic risk that weather events such as hurricanes, drought and heat waves pose to many Americans’ biggest financial asset—their homes.
Thousands of displaced Americans are currently contending with the fallout from recent natural disasters including this year’s wildfires in Los Angeles and hurricanes that ravaged the Southeast last fall.
The relationship between climate change and home values has become a more urgent question as losses from storms, wildfires and other natural disasters are hitting new records. Climate change is making many of those events worse, scientists say, and more Americans have moved to disaster-prone areas in recent years, increasing the number of properties at risk.
First Street projects the hardest-hit places will have rising home-insurance costs and population declines. The counties with the biggest projected population loss over the next 30 years are Fresno County, Calif.; Ocean County, N.J.; and Monmouth County, N.J.
Other regions are projected to have higher home-insurance premiums but continued population growth over the next 30 years, because strong local economies or other amenities are drawing people to those areas. These include counties in the Houston, Miami and Tampa, Fla., metro areas.
A firefighter working to save a home in January during the Eaton fire outside of Los Angeles. Photo: Andrew Silk/Zuma Press
Some economists have argued for years that climate change should weigh on home prices in certain places, as home insurance becomes more expensive and Americans move to safer areas.
The effects could be far-reaching. Homeowners might have to sell their homes at a loss or struggle to sell them at all. Declining property values could hurt local property-tax revenues.
So far, however, the effect of climate change on home prices has been hard to find on a national level. Home prices climbed sharply in 2020 and 2021 as housing demand rose. Home-sales activity has plunged in recent years, but prices remain near record highs, including in some states considered vulnerable to climate change such as Florida and Arizona.
“There is evidence that it’s affecting people’s behavior about where to live and where to buy homes, but only in some locations and still kind of at the margins,” said Jenny Schuetz, vice president of housing at Arnold Ventures. “If you look at national population growth and migration, people are moving towards relatively high-risk places.”
First Street’s $1.47 trillion estimate represents the effect that climate risks are projected to have on home values and doesn’t account for how inflation or other factors could also affect home values. These projections also don’t take into account any changes that local areas might make to adapt to climate change, such as building better flood protections.
And if home values continue to appreciate at a rapid rate, the First Street figures won’t look as ominous as they seem today. For instance, if home values double in the next 30 years—from an estimated $50 trillion today to $100 trillion in 2055—a $1.47 trillion decline would represent only about a 1.5% decrease.
Home-price gains in many areas will likely outpace the climate-related losses, said Jeremy Porter, First Street’s head of climate implications research.
“They just won’t gain as much as they would have without the climate risk,” he said. “There’s a large number of communities that are going to be disproportionately impacted.”
First Street sells its data to companies, and its property-level risk forecasts are available on home-listing sites such as Zillow.
First Street’s study projects that average home-insurance premiums will rise 29.4% in the next three decades and that the number of Americans who will consider climate risks when moving will soar, from 5.2 million in 2025 to 55 million in 2055.
“One of the pain points for homeowners in the coming years is going to be affordability of insurance and property taxes,” said Benjamin Keys, professor of real estate and finance at the Wharton School of the University of Pennsylvania. “There are people who are going to be stressed and will want to relocate.”
MarkGarcia in 2023 at the campsite on a concrete slab where his house used to be in Fort Myers Beach, Fla. Photo: Marco Bello for WSJ
Mark Garcia never thought he would live anywhere but the beach. After his home in Fort Myers Beach, Fla., was swept away by Hurricane Ian’s floodwaters in 2022, Garcia lived in a tent on his empty lot for nearly six months, hoping he would be able to rebuild.
But after two more hurricanes, Helene and Milton, brushed past his community last year and flooded the island again, he decided to list his lot for sale last month.
“We’ve kind of given up on the whole beach-living dream,” Garcia said. “Even though we didn’t have a house there anymore, seeing it go underwater again—it helped make up our decision.”
He moved slightly farther inland to Bonita Springs, Fla., to live with his girlfriend in a home that didn’t flood during Hurricane Ian.
In many cases, people will likely move out of the riskiest neighborhoods into nearby areas that are relatively safer and have more economic opportunities, Porter said.
“We’re not seeing mass migrations—everybody’s not leaving Houston to go to Minnesota or something like that,” Porter said. “But people are leaving Southeast Houston to go to Northwest Houston, because it’s higher ground.”
The River Arts district in Asheville, N.C., was heavily damaged by Hurricane Helene. Photo: Angela Owens/WSJ
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