Despite Risk, Homes in High-Flood Areas Flying Off the (Continental) Shelves
Hurricane seasons and climate change are threatening to redraw coastal U.S. maps. But it’s not stopping homebuyers from chasing down waterfront properties.
Redfin, Seattle, reported this week that homes with known high flood risks are nonetheless selling for record premiums. It reported the median sale price of homes with high flood risk was $402,010 in the first quarter, compared to $353,783 for homes with low flood risk. High-risk homes sold for a record 13.6% premium—up from a premium of 10.1% in the first quarter and a premium of 7.2% a year ago.
Redfin reported since 2013, homes with high flood risk have sold for nearly 7% more than homes with low flood risk on average, likely because many of them are luxury waterfront properties. That premium surged during the coronavirus pandemic, when many wealthy homebuyers started eyeing oceanfront or lakefront houses outside of major cities.
“Americans are buying the beach houses they always dreamed of because they have the flexibility to work from wherever they want,” said Redfin Senior Economist Sheharyar Bokhari. “While flood risk is intensifying in many parts of the country, it doesn’t seem to be a deal breaker for a lot of homebuyers. This may be because buyers aren’t aware they’re purchasing a home in a flood plain or just don’t view it as an immediate danger. Places with high flood risk are also often home to large concentrations of retirees, many of whom don’t see climate change as a threat they need to worry about in their lifetime. Florida is one example.”
Last week, CoreLogic, Irvine, Calif., in its 2021 Hurricane Report identified more than 31 million single-family homes (and nearly one million more homes in multi-unit buildings) that are at moderate or greater risk from the damaging winds of a hurricane. Nearly eight million of these homes had direct or indirect coastal exposure and subsequent risk from coastal storm surge and damage from hurricanes.
Redfin said places that are prone to flooding are also seeing stronger growth in home sales. Sales of high-flood-risk homes rose 18.6% year over year in the first quarter—about double the 9.6% gain in sales of low-flood-risk homes.
Heather Kruayai, a Redfin again in Jacksonville, Fla., said homebuyers often inquire about flood risk, but it virtually never causes them to back out. Jacksonville, which is on the Atlantic Ocean and has two waterways running through it, has nearly 43,000 properties facing high flood risk, according to First Street Foundation’s Flood Factor.
“If you buy a home on the water in Florida, flooding is just something that comes with the territory. Most buyers understand that,” Kruayai said. “A lot of out-of-state buyers have been moving here during the pandemic and purchasing waterfront properties, but there are also locals who are looking for space to spread out because the city has become so congested. Even if you wanted to negotiate a lower price due to flood risk, you’d have a tough time because we’re in such a hot seller’s market.”
The report noted while home prices and sales growth are both higher for high-risk homes, homes with low flood risk are more likely to fetch more than their owners ask for. In the first quarter, 47.2% of low-flood-risk homes went for more than they were listed for, compared to 37.4% of high-flood-risk homes.
Bokhari said properties with low flood risk typically cost less than properties with high flood risk because they’re less likely to be on the beach with waterfront views. “Because low-risk properties are more affordable, they face more competition, which means buyers are more likely to bid up the prices,” he said.