Redfin flood factor9/12/2023 ![]() Despite these concerns, the magnitude, distribution and potential social and economic consequences of overvaluation in US housing markets remain uncertain. ![]() This unpriced flood risk could perpetuate perverse incentives for continued development in floodplains and underinvestment in hazard mitigation, further inflating the housing bubble. One study estimated that properties in the 100 yr flood zone could be overvalued by an average of 8.5% of their current value 9, not accounting for increasing damages from climate change. While empirical studies have observed an average discount of 4.6% for properties located in the 100 yr flood zone 10, recent evidence suggests that this price discount does not fully capture the expected costs of flooding 7, 11. The increasing burden of flooding under climate change has led to growing concerns that housing markets are mispricing these risks, thus causing a real estate bubble to develop 7, 8, 9. 5) and average annual losses (AALs) by at least 26% by 2050 under Representative Concentration Pathway (RCP) 4.5 6, presenting substantial costs to property owners, insurers, mortgage lenders and the federal government. Increasing frequency and severity of flooding under climate change is predicted to increase the number of properties exposed to flooding by 11% (ref. Currently, more than 14.6 million properties in the United States face at least a 1% annual probability of flooding 5, with expected annual damages to residential properties exceeding US$32 billion 6. Adaptation responses will not only determine the magnitude of total costs, but alsowhether these costs become increasingly borne by American taxpayers, or alternatively become internalized by those who are directly exposed to physical climate impacts 3.Īmong the natural hazards exacerbated by climate change, flooding is the deadliest, costliest and most widely experienced in the United States 4. These risks stem not only from the physical impacts of climate change, but also from how property owners, private companies and public institutions respond to growing climate hazards. Climate change poses a range of financial and economic risks to households, communities and market sectors across the United States 1, 2.
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