Residential real estate, valued at $50 trillion, has long been a cornerstone of the U.S. economy. However, climate change is significantly altering homeownership trends and property values. Historically, population migration followed affordability and quality of life, leading many to relocate to Sun Belt states such as Texas, Florida, and California. Yet, these regions now face growing exposure to extreme weather events, prompting higher insurance costs and increased overall homeownership expenses.
Climate shifts affect regional desirability, as coastal areas contend with rising sea levels while inland regions grapple with heat waves, droughts, and floods. The intensifying frequency of natural disasters has led insurance providers to raise premiums or exit high-risk markets altogether, further driving up costs for homeowners. As a result, traditional migration patterns are evolving, forcing communities and stakeholders to reassess property investments and risk management strategies.
According to a report from First Street Foundation, climate risks are reshaping real estate fundamentals across the nation.
Escalating Insurance Costs Impacting Homeownership
One of the most striking developments is the acceleration of insurance costs relative to mortgage payments. From 2013 to 2022, insurance costs doubled as a percentage of mortgage payments, increasing from 7-8% to over 20%. This spike is disproportionately affecting high-risk coastal metros, with cities like Miami (322% increase), Jacksonville (226%), Tampa (213%), New Orleans (196%), and Sacramento (137%) facing the steepest hikes.
First Street Foundation estimates that unrestricted risk-based insurance pricing could drive a 29.4% rise in average premiums by 2055. This includes an 18.4% correction for previously underpriced risks and an 11% increase due to escalating climate threats. As insurance costs outpace home appreciation, affordability concerns are reshaping demand, contributing to national housing market shifts.
Climate Migration and Property Value Declines
The financial burden of climate change extends beyond insurance premiums. First Street’s projections estimate that 55 million Americans will voluntarily relocate within the U.S. by 2055 in search of areas with lower climate risk. This migration pattern is expected to lead to distinct neighborhood trajectories, categorized as Climate Abandonment (26% of census tracts), Risky Growth (31%), Tipping Point (27%), Economic Decline (11%), and Climate Resilient (5%).
By 2055, 84% of all census tracts (totaling 70,026 neighborhoods) could see declines in property values, amounting to a net loss of $1.47 trillion, according to First Street Foundation. Even economically strong metropolitan areas may struggle to retain populations if climate risks become unmanageable.
As homeowners, investors, and policymakers navigate this evolving landscape, balancing economic opportunities with climate resilience is becoming an urgent priority. Understanding these shifts will be crucial for mitigating financial risks and ensuring long-term housing market stability.