The future of residential property valuations is becoming deeply intertwined with the growing realities of climate change. As global temperatures rise, the frequency and severity of extreme weather events, such as hurricanes, wildfires, floods, droughts and extreme heat are expected to intensify. These environmental shifts pose both direct and indirect threats to real estate markets across the country.
A recent report from First Street estimates that this year, 5.2 million Americans will voluntarily relocate within the U.S. to escape areas most vulnerable to climate risks. This migration is expected to increase substantially over the next few decades, with more than 55 million people potentially relocating by 2055.
The drivers of this migration include exposure to extreme heat, wildfire smoke, flooding and drought. California as well as the Gulf and Eastern coasts are particularly prone to climate risks, and central regions also have found themselves in harm’s way.
As climate change intensifies, this migration pattern will accelerate, particularly in urban areas. The trend is expected to shift population growth from high-risk coastal and southern areas to central U.S. states and regions that are less vulnerable to extreme weather. Brokers in these areas will need to position themselves to accommodate the growing demand for homes in these “climate-resilient” locations, such as Denver, the Midwest and parts of the East Coast.
While fear alone of severe weather events does not appear to be enough of a catalyst to move the macro-needle of massive migrations into safer areas of the nation, the cold reality of rising insurance costs and borrowing trends will more likely force people to move.
According to FirstStreet, such migration patterns will devalue residential real estate in the affected areas by $1.47 trillion over the next 30 years. One of the most profound shifts in the real estate market is how homebuyers have begun to prioritize climate risk in their purchasing decisions. According to a 2024 report by Zillow, a staggering 73% of homebuyers now consider climate risks when choosing a location for their new home. This shift marks a significant change in consumer behavior, as environmental risks are ranking alongside traditional factors like school districts, neighborhood amenities and commute times as far as what people consider when they move.
Patrick Parker, president of Raintree Investment Corporation, is on the front lines of this migration. His firm builds and owns masterplanned communities in the six-state Mountain West region, including Lake Las Vegas in Nevada and Jordanelle Ridge in Utah, which have been receiving heavy interest from Californians who are fed up with fire and severe weather and/or being priced out due to rising insurance costs.
“Everything is moving from the I-5 to the I-15,” Parker says, referring to the interstate corridors of the West Coast and Mountain West region, respectively. The migratory pattern has been especially apparent in Henderson, Nev., where Parker has seen a 50-60% growth in recent years. He says two-thirds of those people came from California—some because of drought and fires, and many because of the rising costs that are associated with them.
“People move for a lot of different reasons, but there’s a tipping point,” Parker says. “It’s the more in-your-face-thing like fires that gets your attention.”
During the first three days of the Los Angeles wildfires that wiped out almost 40,000 acres and caused an estimated $250 billion in economic damage, Raintree received a massive 50% spike in web traffic from Los Angelenos looking to buy houses in a safer region.
Personally, Parker experienced these fears first-hand when he used to live in Orange County, California, and had to be evacuated because of wildfires. His friends and neighbors lost their homes, and he fears that the trend is only going to get worse.
“We’re in the early innings of it,” Parker said, adding that the economic calculus behind the decision to move adds up. “If you can move to Nebraska instead of San Diego and get a bigger house and still vacation in San Diego, it makes sense to move.”
The Great Offset
While $1.47 trillion may sound like a lot of money—it is—real estate professionals should note that the total value of American homes are currently around $50 trillion and experts predict that any losses from migration would be offset by increasing valuations in the new markets where people move.
“At a nationwide level, unless the national population goes down, people are going to need houses,” said Jeremy Foster, founder of leanding solutions provider Calque, adding that the resulting increase in new value of new markets would be “a meaningful offset” to the losses incurred by those leaving climate change-affected areas of America’s sunbelt.
Foster said he’s noticed an uptick in people moving out of California, Texas and Florida due to rising insurance costs, and that values in coastal Texas and Florida could have a move down very soon because insurers are pulling out and banks need insurance. His company fills the void in transactions that require a buyer to sell their existing home in order to close on a new one by making binding offers that guarantee the lender that if the first property doesn’t sell, Calque will step in and buy it—something they’ve only had to do in about 2% of their deals—as long as the property is not in a designated flood zone.
The rise of climate-driven migration is not just a threat to some areas. It also presents significant opportunities for real estate brokers in more climate-resilient locations. Areas that are less susceptible to extreme weather events, such as the Midwest, parts of the East Coast and cities like Denver, will likely see significant population growth over the next three decades. Such climate-resilient communities are projected to experience a population growth rate of 68% from 2025 to 2055, according to FirstStreet.
For real estate brokers in these regions, the opportunity is clear: positioning properties in these climate-resilient areas will be key to meeting the demand for housing in the coming decades.
Demand outweighs fear, but money moves markets
While some are fleeing to safety and affordability, most are staying put for now. And still, more newcomers are arriving. According to First Street, this dynamic may not be sustainable as insurance costs will eventually become too high and spark a reversal in valuations. Until then, though, demand will continue to outpace supply.
“The problem isn’t that there’s a lack of buyers. It’s that there is a lack of sellers,” says economist Dr. Christopher Thornberg, founding partner of Beacon Economics.
In the near term, property values in many climate change-affected areas are expected to continue rising as people continue to seek warmer clients, stronger job opportunities and a better way of life compared to the frigid winters experienced in the north where real estate agents struggle with more seasonal stress.
Looking at the recent fires in Los Angeles, Thornberg expects little impact on valuations, noting that 95% of homeowners in the city are still insured and that the rising costs are “minuscule” compared to their current mortgage obligations. While high-profile areas such as Pacific Palisades and Malibu get a lot of attention because of the affluent and famous people who live there, the destruction is not nearly as widespread as it seems compared to other fires Californians have endured in recent years.
“We lost 18,000 structures in a county of 10 million people,” Thornberg says. “Compare that to the 8,000 buildings lost in Sonoma (2024) with a population of 600,000.”
While the risk of fires is rising from unavoidable dry weather and winds, Thornberg noted that most of the insurance issues, tax policies and mismanagement of the emergency response in Los Angeles are controllable factors that can be improved. With insurance costs on the rise, many states are looking to California for guidance due to the relative success it’s had with shared pools of insurance to cover certain high-risk areas; but the policies have only gone so far and have produced a parallel threat from rising taxes.
Going back to the early 2000s and 2010s, home insurance costs made up approximately 7-8% of mortgage and interest payments. However, between 2013 and 2022, these costs more than doubled, rising to over 20% of mortgage payments for many homeowners. Florida has the highest average home insurance premiums in the U.S., and these premiums have surged by 47% over the past five years due to intensifying hurricane risks.
These rising premiums not could put downward pressure on property valuations, but such a trend is not immediately playing out in California where destroyed properties are getting a plethora of bids from interested buyers only weeks after the Los Angeles fires, though the city of Paradise, California, is an example of a community that has yet to recover from the devastating fire in 2018.
Ace Woods is the co-founder and director of real estate for Revest Homes in Santa Cruz, California, which had 900 homes burn down in 2020. She’s helped many relocate or rebuild in the area because most people still want to stay as long as they can afford the rising insurance costs, Woods said.
“Those who’ve lost homes tend to stay in the area,” she says. “The main reason people leave is economical or political.”
Woods cites taxes, insurance and rebuilding policies as the biggest hurdles that need to be cleared in order to make Santa Cruz as desirable as it can be. Even with all of that, though, the affluent areas along the coast have not seen any drops in valuation during or since the 2020 fire, which forced the evacuation of more than 77,000 people, burned more than 86,500 acres of land, and destroyed 1,490 structures in Santa Cruz and San Mateo counties.
“There is more demand than supply (but) people may get forced to sell due to insurance. It’s always economic, not fear, and that can be changed. It depends who’s in charge,” Woods says. “In the last four to five years, homes in the more affluent areas still appreciated very well despite everything. The people getting squished are those with fixed incomes (and) the communities on the fringe, the first-time homebuyers, which are further inland.”
Similarly, the Gulf Coast continues to see enormous growth despite known climate risks, with the exception of New Orleans following Hurricane Katrina. In 2023, counties in the U.S. with high fire risks, particularly in Texas, experienced a net gain of 63,365 residents. Flood-prone counties, particularly in Florida, saw a net increase of 16,144 people. This influx is a direct result of people migrating toward these areas in search of more affordable housing, job opportunities, and a warmer climate. The Sun Belt—anchored by California, Texas, and Florida—has long been in high demand by northerners looking for a better quality of life. Together, these states accounted for nearly 40 percent of the nation’s population growth between 2000 and 2020, adding millions of new residents.
Despite the increasing occurrence of climate-related risks, many homebuyers are either overlooking or underestimating these dangers, drawn instead by the tangible benefits of living in Sun Belt states. However, brokers must be prepared to adapt to a potential shift in dynamics as spiking insurance costs make these markets less desirable.
“People take more precautions when they’re purchasing,” said Gordon Miles of Levin Rinke Realty, in Pensacola, Florida. “They look at flood zones, but they continue to move to those locations.”
Resiliency reigns
Houston has stood out as possibly the best example of a climate-resilient city. It has faced multiple devastating natural disasters, including Hurricane Harvey in 2017, which caused $160 billion in damages, and Hurricane Ike in 2008, which resulted in $43.2 billion in damages. In addition, Houston has suffered from severe flooding events in 2015 and 2016, which resulted in $6.5 billion in damages. Despite these catastrophic events, the city’s population has grown by 1.3 million people since 2000, and home values have risen by 58% from 2017 to 2022.
Even as risk-based premiums under the National Flood Insurance Program (NFIP) and regular homeowners’ insurance costs have risen 40%, the demand for housing in Houston has remained strong due to its strong job market and economic growth.
Still, the floods will keep coming. First Street projects that flood-related damages could increase dramatically in the coming decades. For example, Jefferson County, Louisiana, home to New Orleans, is expected to see a 533% increase in flood-related damages by 2050. Atlantic County, New Jersey, and Broward County, Florida, are also facing projected flood damage increases that will likely drive insurance premiums up significantly. The escalation in flood damages could dramatically alter the financial landscape of these areas, making them less attractive to potential homebuyers.
Seasoned real estate executive and investor Greg Rand has been very active in North Carolina lately despite its issues with hurricanes. One of the main reasons markets such as Raleigh and Charlotte became very hot were because of people fleeing the overpriced tri-state area, Rand said. Then as it got expensive, a lot of smart money began investing in places like Greensboro, North Carolina. Similar patterns have played out as people moved to Athens and Augusta in Georgia. Climate-related costs may fuel some of this trend, but Rand said it will always prop up fresh demand and valuations in new markets.
“Next, they may look at Alabama, Kentucky and Arkansas. I have a feeling you can buy a sweet house in Arkansas, and the people are really nice,” Rand said. “A correction might be coming, but it won’t be a meltdown.”
