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DS News December 2022

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Page 95 of 99

94 94 INVESTMENT GOVERNMENT PROPERTY PRESERVATION Journal NATURAL DISASTER IMPACTS ON CONSUMER BEHAVIOR AND HOME PRICES A recent examination of data by Realtor. com took a closer look at the impact of flooding and wildfire risk and the risk of these natural disasters and their impact on consumer behavior and home prices. Realtor.com's report found that the cumula- tive price growth of low-risk homes consistently outperformed the rate of high-risk homes, sug- gesting that flood risks are reflected in housing prices. e divergence in growth rate was more prominent in more risk-prone areas. Low-risk homes in Florida, North Carolina, and South Carolina counties outpaced high-risk homes While the cumulative price growth of low-risk homes consistently outpaced the rate of high-risk homes in the second quarter of 2022, affordability concerns pushed up the demand for endangered homes—a pattern found to be more pronounced in California. Realtor.com reported that the price gap per square foot between California low-risk and high-risk homes narrowed from a high of 10.5% to 8.7%, suggesting that homebuyers lose the suburbs' affordability and face higher wildfire risks by purchasing homes in risk-prone areas. Realtor.com analyzed median sale prices per square foot for homes with different flood factors designated by First Street Foundation in 271 counties across 41 states between the first quarter of 2016 and the second quarter of 2022. For the survey, a low-risk home was defined as a property with a flood factor ranging between one and four, and a high-risk home as a property with a flood factor rate between five and 10. Luxury homes were excluded from the findings, defined as those having sale prices within the top 10% in their respective quarter, to account for the sometimes very different real estate market trends for these types of homes. Cumulative price growth for low-risk homes between Q1 of 2016 and Q2 of 2022 consistently outpaced the rate among high-risk homes, suggesting that flood risks are reflected in housing prices. By the second quarter of 2022, the cumulative price growth of low-risk homes across all counties was 72%, 1.5 percentage points higher than the rate of high-risk homes. During the last flood-related disaster season (Q3 of 2021), the growth rate gap between low-risk and high-risk homes was 1.7 percentage points. It may not be surprising that the high-risk homes with the slowest price appreciation clus- tered in counties from Florida, Texas, Georgia, New Jersey, and North Carolina. However, there is sometimes diversity in the price growth trends within a state. For example, high-risk homes in Walton County, Florida, saw the slow- est cumulative price growth compared to safer homes (58 percentage points less). However, in Pasco County, Florida, high-risk homes out- paced low-risk homes by 39 percentage points cumulatively. In New Jersey, Cape May County and Camden County have seen high-risk homes appreciate 36 and 29 percentage points less over these six years. In contrast, high-risk homes in Essex County and Monmouth County saw sale prices grow by 56 and 43 percentage points more over this period. In terms of Florida, although commonly a destination for those migrating from elsewhere, the impacts of storms like the recent Hurricane Ian can be far-reaching. When Hurricane Ian made landfall, it became the costliest Florida storm since Hurricane Andrew hit the Sunshine State in 1992. CoreLogic estimates the damage and loss totals from Hurricane Ian—includ- ing total flood and wind losses—between $41 billion and $70 billion. is total includes wind loss, re-evaluated insured and uninsured storm surge loss, and newly calculated inland flood loss for residential and commercial properties. Further, Redfin found that pending home sales fell 58% year over year in the Cape Coral metro area during the four weeks ending Octo- ber 16 in the aftermath of Hurricane Ian. at total is near twice the nationwide decline of 32%. Pending home sales also slumped in the nearby Naples (-52%) and North Port (-51%) metro areas over that same timespan. Other Florida metros were impacted by the storm, as sales fell 47% in Miami, 46% in Jacksonville, and 43% in West Palm Beach, while sales were down more than 40% in the Deltona, Tampa, and Orlando metros. e divergence in growth rate between low- risk and high-risk homes correlates with home- buyers' risk awareness. In other words, when shopping in more risk-prone regions, home- buyers' desire to live in safer homes can expand the price growth gap between the two types of homes. For example, the Eastern Coastal

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