How Natural Disaster Risks Affect Home Appreciation

ATTOM Data Solutions recently released its 2018 US Natural Hazard Housing Risk Index.

It turns out that mid-priced homes in cities with the highest risks of natural disasters have appreciated +40% over the last decade whereas mid-priced homes in cities with lower risks of natural disasters have appreciated +25% for the same time period.

Source: ATTOM Data Solutions

In one way, ATTOM’s results sound counter-intuitive and, in another, these results make sense. Though coastal cities bear higher risks of flooding and hurricane storm surges, homes in coastal cities tend to have higher appreciation values.

ATTOM indexed natural hazard risk in +3,000 counties and +22,000 cities based on the risk of 6 natural disasters…hurricane storm surge, earthquakes, floods, hail, tornadoes and wildfires.   It also indexed 2,616 cities and 440 counties containing +53M single-family homes and condominiums.

Cities with the highest flood risk had double the rate of appreciation and cities with the highest risk of hurricane storm surge risk had triple the rate of home appreciation over the last 10 years. Cities with the highest risk of wildfires also outperformed in terms of home appreciation increases, just not as dramatically as cities facing flooding and hurricane storm surges.

“Weather is the largest external swing factor in in the US economy and accounts for over $550B/year in lost revenue and up to 76,000 lost jobs,” said Mark Gibbs, president and CEO of Weather Source. And all “weather” is not the same. Homes affected by tornado risks are discounted by- 2.2% below estimated market value. Homes in risk of flooding are discounted by an average of- 2.4% below estimated market value. And homes affected by hurricane storm surges are discounted by approximately -1.4% below estimated market value.

ATTOM Data Solutions found that among the 2,616 cities indexed, Oklahoma City OK, San Diego CA, Clearlake CA, San Jose CA, Madera CA, Riverside – San Bernardino CA, Bakersfield CA, Santa Cruz CA, Houston TX and Huntsville AL had the highest risk of natural disaster.

Among the counties with the highest risk indices, three were in California (Santa Clara/San Jose, Marin/San Francisco and Santa Cruz Counties), one was in Florida (Key West) and one was in Oklahoma (Oklahoma City).

The foreclosure rates in cities with the highest risk of flooding were nearly 9% higher than average foreclosure rates nationwide. Cities with the highest risk of tornadoes accounted for 10.0% of all foreclosures on homes with mortgages.

Cities with high risk of wildfires could not be quantified as cleanly as other natural disaster risks due to the reality of wildfires being unpredictable.