Buying a home these days doesn’t come cheap. Figures from the Case-Shiller National Home Price Index were released on Tuesday, showing us average prices in major US cities.
The index posted an annual gain of 19.7% in July, the highest rate of appreciation since its launch in 1987.
The Mortgage Bankers Association also recently released a report, which indicates that climate change is likely to increase insurance premiums and loan interest rates. This means that the cost to get your hands on that home could increase even more.
Our home buying system is complicated. It distributes the risk of the investment to a bunch of parties. Sean Becketti, who wrote the study for the MBA, said identifying interested parties was the first line of inquiry.
“Who are all these stakeholders and on which risks are they most likely to be at the forefront? ” he said.
So you have homeowners, insurers, governments, even private investors – those hedge funds that gobble up mortgages as part of their portfolios. Then there are the lenders.
This raises the question, “Will banks continue to accept 30-year fixed rate mortgages?” Said Matthew Khan, professor of environmental economics at the University of Southern California.
If lenders don’t because of the risk of natural disaster, “people are going to have to make larger down payments and mortgage payments, and that will reduce their purchasing power,” he said.
It would also change where we buy houses.
“We just won’t be able to live everywhere we live now, and the new homes we want to develop will need more infrastructure. And that just means everything is going to be more expensive, ”said Jesse Keenan, who teaches real estate at Tulane University in New Orleans.
Cities that lose population due to climate migration will have fewer taxpayers and less income. This loss has consequences, said Rhiannon Jerch of Temple University.
“When a city is compromised in its ability to deliver goods and services, I think the people who really suffer are sure to be low-income people,” Jerch said.
Cities will have to decide between investing in climate resilience infrastructure and other goods and services, she said, as funds dry up.