Frequent Typhoons, Floods, and Heatwaves... Climate Risk Begins to Reflect in US Housing Prices

JP Morgan Analysis

An analysis has emerged showing a clear negative correlation between climate risk and housing prices.

On the 11th (local time), according to the financial news outlet MarketWatch, JP Morgan stated in a recent report that it discovered this correlation after analyzing data from the Federal Housing Finance Agency (FHFA). JP Morgan considered climate risk variables such as storms, wildfires, heatwaves, floods, sea level rise, and droughts.

Until now, the real estate market had not reflected climate risk in housing prices. Regarding this, JP Morgan noted, "Since 2000, housing prices in areas with high climate risk have on average risen faster."

However, since early last year, JP Morgan explained, "Housing prices in regions vulnerable to the climate crisis have started to rise more slowly than those in less vulnerable areas." This is because rising home insurance premiums in areas frequently affected by climate disasters like hurricanes are lowering real estate values.

Additionally, Americans are increasingly recognizing the severity of the climate crisis. According to a recent survey by the real estate brokerage Redfin, one in five Americans who experienced home damage from Hurricane Helen last September said they are looking for a new place to move. Consequently, demand for homes in areas with lower climate crisis risk is rising, which inevitably drives prices sharply upward.

JP Morgan added, "Since 2000, cumulative housing price increases have still been higher in high climate risk areas, but over time, the gap between high- and low-risk areas is narrowing and will eventually reverse." This is because these climate risk factors have not yet been fully reflected in housing prices.