IRVINE, CA—One of a handful of secondary and tertiary factors that prospective home buyers and current homeowners should check, natural-hazard risk is becoming increasingly important, ATTOM Data Solutions' SVP Daren Blomquist tells GlobeSt.com. The firm recently reported that home sales in the first six months of 2016 increased 4.2% from the same time period a year ago in the bottom fifth of US counties with the lowest level of natural-hazard risk—more than twice the 1.9% increase in the top fifth of US counties with the highest level of natural-hazard risk. We spoke exclusively with Blomquist about the importance of natural-hazard housing risk and how it plays into other housing-market factors.
Globest.com: How important is natural-hazard housing risk to home buyers as compared to other secondary and tertiary factors?
Blomquist: It's one of a handful of secondary and tertiary factors that is important for every prospective home buyer as well as every current homeowner to check because if the home is in a very high-risk area, it will impact both the cost of homeownership in the form of higher insurance as well as potential loss of the home given a natural disaster. Many other secondary and tertiary factors are more preference based and therefore only relevant for a subset of home buyers to look at (i.e., walkability, access to transportation and other amenities such as restaurants, grocery stores, etc.—even school quality).
GlobeSt.com: Is natural-hazard risk increasing in importance to home buyers?
Blomquist: There is evidence in this report that natural-hazard risk is becoming increasingly important. Counter to the trend we saw in previous years, where home-sales activity was stronger in high-risk areas for natural hazard —indicating stronger demand for those markets—in 2016, we're seeing the opposite, with stronger home-sales increases in low-risk areas for natural hazards. A big part of this is affordability. Markets with lower risk tend to be lower-priced and more affordable; however, even if we just narrow the analysis down to markets with a median price below the national median of $210,000, we still see stronger home sales in low-risk areas among that subset of low-priced markets.
GlobeSt.com: Is increasing demand for apartments in markets that can't keep up with this demand causing people to pursue home buying more fervently and, in kind, making home buyers less discerning when it comes to some of these risk factors?
Blomquist: When analyzed by type of natural-hazard risk, areas with a high risk of tornados and hail are seeing the strongest increase in home sales. Those markets also happen to be more affordable than any of the other markets with a high risk for the other four natural hazards: earthquake, hurricane-storm surge, flood, wildfire. That does suggest that lower-priced homes in those markets are luring both buyers and investors to be more willing to overlook the natural-hazard risk. Certainly, in most of these markets, it is more affordable to buy than to rent, as well— thanks in part to the lack of rental inventory—so that could be pushing more would-be renters to purchase. Additionally, the lack of apartment inventory in these markets also could be pushing more investors to purchase homes as single-family rentals. A prime example of this is Birmingham, AL, which had the highest share of institutional-investor purchases in Q2 of any metro area nationwide, but also is in the highest risk category for tornadoes. But the median home price in the largest county there, Jefferson, is still below $150,000, and we saw overall home sales increase by nearly 9% in the first half of 2016—three times the average increase nationwide of less than 3%.
GlobeSt.com: What else should our readers know about natural-hazard housing risk and its effect on home buying?
Blomquist: We suspect that natural-hazard risk will become increasingly important as climate change potentially creates higher natural-hazard risk in certain areas and new types of natural-hazard risk in some areas. That in turn will push up insurance rates, increasing the cost of homeownership and could certainly shift buying behavior.
Click here to view our full coverage on disaster risk and recovery for Hurricane Season 2016.
IRVINE, CA—One of a handful of secondary and tertiary factors that prospective home buyers and current homeowners should check, natural-hazard risk is becoming increasingly important, ATTOM Data Solutions' SVP Daren Blomquist tells GlobeSt.com. The firm recently reported that home sales in the first six months of 2016 increased 4.2% from the same time period a year ago in the bottom fifth of US counties with the lowest level of natural-hazard risk—more than twice the 1.9% increase in the top fifth of US counties with the highest level of natural-hazard risk. We spoke exclusively with Blomquist about the importance of natural-hazard housing risk and how it plays into other housing-market factors.
Globest.com: How important is natural-hazard housing risk to home buyers as compared to other secondary and tertiary factors?
Blomquist: It's one of a handful of secondary and tertiary factors that is important for every prospective home buyer as well as every current homeowner to check because if the home is in a very high-risk area, it will impact both the cost of homeownership in the form of higher insurance as well as potential loss of the home given a natural disaster. Many other secondary and tertiary factors are more preference based and therefore only relevant for a subset of home buyers to look at (i.e., walkability, access to transportation and other amenities such as restaurants, grocery stores, etc.—even school quality).
GlobeSt.com: Is natural-hazard risk increasing in importance to home buyers?
Blomquist: There is evidence in this report that natural-hazard risk is becoming increasingly important. Counter to the trend we saw in previous years, where home-sales activity was stronger in high-risk areas for natural hazard —indicating stronger demand for those markets—in 2016, we're seeing the opposite, with stronger home-sales increases in low-risk areas for natural hazards. A big part of this is affordability. Markets with lower risk tend to be lower-priced and more affordable; however, even if we just narrow the analysis down to markets with a median price below the national median of $210,000, we still see stronger home sales in low-risk areas among that subset of low-priced markets.
GlobeSt.com: Is increasing demand for apartments in markets that can't keep up with this demand causing people to pursue home buying more fervently and, in kind, making home buyers less discerning when it comes to some of these risk factors?
Blomquist: When analyzed by type of natural-hazard risk, areas with a high risk of tornados and hail are seeing the strongest increase in home sales. Those markets also happen to be more affordable than any of the other markets with a high risk for the other four natural hazards: earthquake, hurricane-storm surge, flood, wildfire. That does suggest that lower-priced homes in those markets are luring both buyers and investors to be more willing to overlook the natural-hazard risk. Certainly, in most of these markets, it is more affordable to buy than to rent, as well— thanks in part to the lack of rental inventory—so that could be pushing more would-be renters to purchase. Additionally, the lack of apartment inventory in these markets also could be pushing more investors to purchase homes as single-family rentals. A prime example of this is Birmingham, AL, which had the highest share of institutional-investor purchases in Q2 of any metro area nationwide, but also is in the highest risk category for tornadoes. But the median home price in the largest county there, Jefferson, is still below $150,000, and we saw overall home sales increase by nearly 9% in the first half of 2016—three times the average increase nationwide of less than 3%.
GlobeSt.com: What else should our readers know about natural-hazard housing risk and its effect on home buying?
Blomquist: We suspect that natural-hazard risk will become increasingly important as climate change potentially creates higher natural-hazard risk in certain areas and new types of natural-hazard risk in some areas. That in turn will push up insurance rates, increasing the cost of homeownership and could certainly shift buying behavior.
Click here to view our full coverage on disaster risk and recovery for Hurricane Season 2016.
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