Buyers Still Have Appetite for Homes in Disaster Zones

natural hazard areas still popular

When it comes to natural hazards, it seems that home buyers take only flood and hurricane disasters seriously.

ATTOM Data Solutions, a multi-sourced property database company, created the 2017 U.S. Natural HazardHousing Risk Index, which found that median home prices in U.S. cities in the 80th percentile for natural hazard risk (top 20 percent with highest risk) have increased more than twice as fast over the past five years and over the past 10 years than median home prices in U.S cities in the 20th percentile for natural hazard risk (bottom 20 percent with lowest risk). (See data in chart at the end of this article.)

Median home prices in cities in the top 20 percent (Very High) for natural hazard risk have appreciated 65 percent on average over the past five years and 9 percent on average over the past 10 years while median home prices cities in the bottom 20 percent (Very Low) for natural hazard risk have appreciated 32 percent on average over the past five years and 3 percent on average over the past 10 years.

“Strong demand for homes in high-risk natural hazard areas has helped to accelerate price appreciation in those areas over the past decade despite the potential for devastating damage to homes that can be caused by a natural disaster — as evidenced by the recent hurricanes that made landfall in Texas and Florida,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. “That strong demand is driven largely by economic fundamentals, primarily the presence of good-paying jobs, although the natural beauty that often comes hand-in-hand with high natural hazard risk in these areas is also attractive to many home buyers.

“There is some evidence in the data that real estate consumers in certain areas are beginning to more heavily factor natural hazard risk into their decisions, particularly when it comes to flood risk,” Blomquist added. “Counter to the national trend, home price appreciation is slower in Florida and Louisiana cities with the highest flood risk than in cities with the lowest flood risk.”

According to Blomquist, looking at the past 10 years, median home prices in high risk areas for flooding are down 3 percent, while in overall markets the median home prices are up 8 percent. “The talk about taking away subsidies for flood programs starting in 2012 may have shocked home buyers,” Blomquist surmises. “They may have decided the risk is not worth it as flood insurance is a high cost. The same holds true for hurricanes. The median home prices in high risk for hurricane was down 7 percent.”

Related Resource: Check out Green Builder’s Resilient Housing Website for information on buildings and systems that are ready for anything.

Appreciation Slower In Cities With Highest Flood Risk

In the state of Florida, median home prices in cities with the highest flood risk were up 8 percent on average from a year ago and up 66 percent from five years ago while median prices in cities with the lowest flood risk were up 10 percent from a year ago and 70 percent from five years ago.

Median home prices in Florida cities with the highest hurricane storm surge risk were up 8 percent from a year ago and 47 percent from five years ago, while median prices in cities with the lowest hurricane storm surge risk were up 11 percent from a year ago and up 67 percent from five years ago.

There was a similar trend in relation to flood risk in the state of Louisiana, which experienced damaging floods in August 2016. Median home prices in Louisiana cities with the highest flood risk were down 20 percent from a year ago and up 2 percent from five years ago while median home prices in the lowest risk cities increased 5 percent over the past year and increased 37 percent over the past five years.

“People in highest flood risk areas are getting the message,” Blomquist claims. “Zoom into Baton Rouge a year ago and there is plenty of data to see what has happened. There was a big drop in prices in areas of Baton Rouge that are high risk vs. low risk areas, where the home prices are up. The further you zoom in you see how people are responding. Real estate consumer behavior is shifting as more incidences occur.”

Homeowners in Highest-Risk Cities Have More Equity

Homeowners in cities in the top 20 percent for natural hazard risk have 32 percent home equity on average compared to 21 percent home equity on average for homeowners in cities in the bottom 20 percent for natural hazard risk.

Seriously underwater homes (LTV of 125 percent or higher) account for 6.4 percent of all homes in cities in the top 20 percent for natural hazard risk compared to a seriously underwater rate of 9.9 percent on average for homes in cities in the bottom 20 percent for natural hazard risk.

Homeowners who sold in the first six months of 2017 had owned for an average of 8.89 years in cities in the top 20 percent for natural hazard risk compared to an average homeownership tenure of 8.03 years in cities in the bottom 20 percent for natural hazard risk.

Counties and Cities With Highest Natural Hazard Risk Index

Among the 735 U.S. counties included in the housing trends analysis, those with the highest overall natural hazard index were Oklahoma County, Oklahoma; Wakulla County (Tallahassee), Florida; Monroe County (Key West), Florida; Cleveland County (Oklahoma City), Oklahoma; and Nevada County (Truckee), California.

Among 50 U.S. cities included in the analysis with a population of at least 500,000, those with the highest overall natural hazard housing risk index were Oklahoma City, Oklahoma; San Jose, California; Los Angeles, California; Bakersfield, California; and Seattle, Washington.

Related Story: ICC Committee Passes New Disaster Recovery Legislation. 

Counties and Cities with Lowest Natural Hazard Risk Index

Among the 735 U.S. counties included in the housing trends analysis, those with the lowest overall natural hazard index were Milwaukee County (Milwaukee), Wisconsin; Cuyahoga County (Cleveland), Ohio; Muskegon County (Muskegon), Michigan; and Lake County (Cleveland), Ohio.

Among 50 U.S. cities included in the analysis with a population of at least 500,000, those with the lowest overall natural hazard housing risk index were Philadelphia, Pennsylvania; Phoenix, Arizona; Buffalo, New York; Orlando, Florida; and Brooklyn, New York.

Click here to view the 2017 Natural Hazards Housing Risk County Heat Map.

 

Overall Natural Hazard Risk Index Category
Column1 Very Low Low Moderate High Very High Grand Total
Number of Cities 689 687 689 687 689 3441
Single Family Homes & Condos 9,501,837 11,114,699 13,178,030 13,348,218 13,898,721 61,041,505
Average Home Value $270,336 $253,651 $262,709 $292,786 $538,800 $323,715
Average Loan-to-Value (LTV) 79.46 79.53 79.99 77.59 68.13 76.94
Pct Seriously Underwater (LTV 125+) 9.9% 10.1% 10.3% 9.0% 6.4% 9.1%
Avg Homeownership Tenure (Years) 8.03 7.49 7.56 7.42 8.89 7.88
Avg Jan-June 2017 Median Sales Price $235,024 $219,207 $227,011 $255,540 $515,028 $290,424
Average of 1-Year HPA 5% 6% 6% 7% 7% 6%
Average of 5-Year HPA 32% 41% 39% 48% 65% 45%
Average of 10-Year HPA 3% 6% 7% 14% 9% 8%
Jan-June 2017 Home Sales 268,863 295,500 380,785 412,976 420,503 1,778,627
1-Year Sales Change -9% -13% -10% -8% -6% -9%
5-Year Sales Change 11% 8% 15% 15% 4% 11%
10-Year Sales Change 1% -5% -7% 0% 11% 0%
For the report ATTOM indexed natural hazard risk in more than 3,000 counties and more than 22,000 U.S. cities based on the risk of six natural disasters: earthquakes, floods, hail, hurricane storm surge, tornadoes, and wildfires. ATTOM also analyzed housing trends in 3,441 cities and 735 counties — containing more than 71 million single family homes and condos — broken into five equal quintiles of natural hazard housing risk.