The increasing power and frequency of natural disasters weigh more heavily on borrowers’ decisions about where to live.
78% of buyers and 84% of sellers said that concerns about extreme weather events factored into how they chose the location of their next home, according to a July Realtor.com survey of more than 3,000 consumers. Overall, 47% of homeowners are more concerned about natural disasters today than they were five years ago, 44% said their attitudes had not changed during this time and 9% were less concerned.
Among recent homebuyers, 72% of Millennials expressed concern, followed by 66% of Gen X, 58% of Gen Z, 55% of Baby Boomers, and 44% of the Quiet Generation. (The survey results were weighted based on age and other factors to align them with their actual demographic proportions in the population, Realtor.com noted.)
Tornadoes were of most concern, as 39% of survey respondents were concerned, 38% were primarily concerned about severe winter storms, 35% declared floods, 29% said hurricanes, 21% said earthquakes and 17% declared forest fires. A separate report from Wells Fargo showed that 71% of Americans do not have a detailed emergency plan for natural disasters. Among them, 40% did not think about doing one while 16% said they did not know how to prepare for it.
In areas accustomed to frequent major weather events, some lenders put risk and loss mitigation at the forefront when working with their clients. Andy Davis, CEO and loan originator at D&V Home Mortgage in Fort Myers, Florida, partners with insurers who know the market and know what to do in the event of a disaster.
“In fact, I feel like 100% of homebuyers who move to Florida are factoring in natural disasters, primarily hurricanes, and rightly so,” Davis said in a statement to NMN. “A lot of buyers don’t take insurance seriously until they need it, but our goal is to get them to contact the agent so they know all of their options. “
Natural disasters caused $ 156 billion in property damage from 2015 to 2019, more than double the $ 70 from 2010 to 2014, according to a study by Neighbor Who. From 1995 to 2019, Texas dominated all states racking up $ 134.7 billion in property damage, followed by $ 84.9 billion in Louisiana and $ 62.6 billion in Florida. However, these totals may continue to increase in the future.
In early September, Hurricane Ida hit the Gulf Coast as Category 4 and the first estimates projected more than 20 billion dollars in damages. It then moved up the east coast as a tropical storm and brought up to $ 24 billion in floods losses.
As policymakers place greater emphasis on the impact of environmental disasters on housing, the mortgage industry is increasingly facing pressure to develop risk models that take such events into account. In early 2021, the Federal Housing Finance Agency asked how it should assess the ability of Fannie Mae, Freddie Mac and federal mortgage banks to account for climate change risk and how it should prioritize this risk and whether to impose weather stress tests on Fannie and Freddie.