Increasing hurricane risk is impacting property values, lending decisions and real estate trends. And sometimes this occurs in unexpected places, because of factors including insurance availability and cost.
This is according to a hurricane risk report by Cotality, which examines the financial and social costs of hurricane risk, especially in areas that are not as prepared to weather the storms. The report identifies more than 33.1 million residential properties that are at moderate or greater risk of damage from sustained winds. Combined, these properties have a reconstruction cost value (RCV) of $11.7 trillion. More than 6.4 million residential properties are at moderate or greater risk of damage from hurricane-related flooding, with $2.2 trillion in combined RCV.
“Our data shows that the coastline is evolving, with the impacts of hurricanes extending not only further – both in cost and distance – but also on a more consistent basis,” said Cotality VP of insurance product marketing Maiclaire Bolton-Smith. “This is being reflected in insurance pricing, which in some cases can actually price people out of what had previously been thought of as less-risky markets.”
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Hurricane risk is expected in Florida, but communities in Virginia, the Carolinas and along the Gulf Coast are also prone as well — but the difference is that those areas are often less prepared, the report said. For example, Charleston, South Carolina, Wilmington, North Carolina, and Virginia Beach, Virginia, are not typically thought of as hurricane hotspots, but in those three cities, more than 656,000 homes are at risk of flooding if a major storm makes direct landfall, said the report. Cotality’s data indicates homes in these markets may be less appealing to buyers, with places in Virginia Beach staying on the market 32% longer than the national average and Wilmington deals with 19% longer.
Florida is the state most exposed to risk, with nearly $8.2 million homes at moderate risk or greater with a combined RCV of $2.3 trillion. Texas followed with nearly 4.8 million homes at moderate or greater risk with a combined RCV of $1.4 trillion and North Carolina came in third with 3.4 million with an RCV of $1 trillion. New Jersey ranked fourth with 2.3 million homes at risk, with an RCV of $1.1 trillion and New York was fifth with 2.2 million at-risk homes with a combined RCV of $1.2 trillion.
Buyers increasingly expect discounts for flood zone properties, but those discounts are often offset by the increasing cost of insurance, if it is available. As people choose less risky areas to live, mortgage applications in Florida submitted by both in-state and out-of-state buyers are declining. Many Florida residents are relocating to Georgia, North Carolina, Texas, Tennessee and South Carolina, according to the report.
This migration may be problematic, however, as the Carolinas, especially coastal and low-lying regions, also face increasing hurricane risk. A false sense of security can leave homeowners vulnerable to both financial and physical loss, said Cotality.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
