Real estate listings websites like Zillow size up a home’s likelihood of flood, fire, and
wind damage. That could affect prices.
Forget about square feet and the number of bathrooms. Home buyers now will also be
asking about the weather.
Many people move to areas endangered by extreme weather events because the
lifestyle and cost of living outweigh the risks. But that is changing, with soaring
insurance costs and two recent devastating hurricanes underscoring the issue.
Home listings giant Zillow Group is rolling out climate-risk estimates that size up a
home’s likelihood of damage from flood, fire, and wind over the next 30 years. These
scores, along with soaring insurance costs, could change the economics of where
people choose to live, as buyers avoid homes with high risk or face fewer bidding wars
to buy them.
Hurricanes Helene and Milton, which separately hit the Southeast last autumn, may
have caused up to $81.5 billion in combined insured and uninsured losses, according to
estimates by CoreLogic, a property data and analytics provider.
“We’ve seen this massive move of people since the pandemic from the Northeast and
Midwest into Florida,” says Moody’s Analytics chief economist Mark Zandi. “That now is
in jeopardy because of the threat of storms like this and what it means for the cost of
owning a home.”
A house’s risk of flood or wildfire usually isn’t as apparent at first glance as an ugly
bathroom or cramped kitchen. But now, Zillow is joining home listing websites like
Redfin , Realtor.com, and CoStar Group ’s Homes.com by adding scores provided by
climate-risk modeling company First Street. ( News Corp , which owns Barron’s, also
owns Realtor.com operator Move.)
Zillow may not be the first to add First Street’s scores but it’s the largest, with 233
million average monthly unique users. That means its rating system will be seen by
many more people. Zillow users can find a listing’s score about halfway down the page
on its website, underneath its payment calculator section. Not every home has a score.
First Street builds models based on historical data, climate projections, and statistical
analysis to determine the probability that a property could see flooding, wildfire,
dangerous winds, or other detrimental weather-related events, even if it hasn’t in the
past. On listings websites that use the data, this appears as a score from one to
10 across five risk categories.
“For people who exclusively use Zillow, this will be the first time they really have seen
this information, whether it’s on their property or in the search process,” says Jeremy
Porter, head of climate implications at First Street.
The tool gives buyers another data point to consider, similar to how they size up a
neighborhood’s downtown or school district online, says Porter.
Homes with better climate scores could become more sought after while those with
worse readings could see lower prices, according to a National Bureau of Economic
Research working paper co-written by Redfin’s chief economist, Daryl Fairweather, and
researchers from the University of Southern California, Columbia University, and the
Massachusetts Institute of Technology.
To test the impact of risk scores, Redfin displayed First Street’s flood ratings to some
users but not to others. The information changed some users’ behavior on searching
and buying, Fairweather says. Compared with a control group, users who viewed
homes with high-risk scores instead made offers on properties that were about half as
risky. The scores also drove up competition for less-risky homes, increasing prices
slightly, and reduced demand for some high-risk homes.
“The flood risk information had a tangible effect on property prices, with homes in high
flood risk areas experiencing a decrease in value,” the authors wrote.
The tool isn’t the only way that prospective buyers can learn about their dream homes’
weather risks. The Federal Emergency Management Agency also maps potential hazards
through its National Risk Index and maintains maps that designate which
homes require flood insurance.
A buyer should consider First Street’s scores as a starting point for further research,
says Collyn Wainwright, the president of the Greater Nashville Realtors board of
directors. “I would encourage consumers to use it as a guideline to then ask more
questions about a property,” she says. “Talking to your homeowners’ insurance agent or
broker is going to give you a much clearer, [more] accurate picture of what the risk is for
that particular home.”
Insurance is an issue that increasingly is tied to climate risk. In fact, rising premiums are
the first way that many homeowners feel the impact of storm risks, says Ben Keys, a
real estate professor at the University of Pennsylvania’s Wharton School. “Getting any
sort of credible information about a property’s climate risk is a big step in the right
direction,” says Keys, who co-wrote a separate National Bureau of Economic Research
working paper on climate risk and property insurance last year.
Premiums, unlike monthly mortgage payments, aren’t a fixed cost. They can be more
difficult to estimate than home prices and mortgage rates, which are easily available
online. That means buyers could be in the dark about potential costs until late in the
purchase process.
Keys’ research found that premiums rose 33% from 2020 to 2023, with those climbing
sharply in areas that FEMA deems to be at higher risk.
In the long run, climate risk could alter migration patterns—whether it’s because of cost
of disasters or insurance. But consumers don’t need to dismiss an area solely based on
an area’s risk rating. It’s cheaper to pay to make a home more resilient than to replace it
after disaster strikes, notes John Rogers, chief data and analytics officer at CoreLogic,
which sells an analytics tool that helps insurers size up the resilience of individual
homes to storms. “Every one dollar that you invest in resiliency [in a] home is equivalent
to six dollars to recover the home if that weather event was to occur,” he says.
A person’s home is “the biggest way that Americans make wealth,” he says. “It’s
definitely worth protecting.”
Shaina Mishkin, BARRON’S