Something strange is happening in the world of real estate: Buyers are paying a growing premium for the privilege of living in flood zones.
Homebuyers in the first quarter of 2021 typically paid 13.6% more for homes at high risk for flooding than for ones with low flood risk, up from 10.6% in the first quarter of 2020, real estate company Redfin said Wednesday—the most since Redfin started tracking the statistic in 2013. The chart below shows how the flood risk premium has leaped during the pandemic to the point where the median price of homes in flood zones is nearly $50,000 more than homes that are high and dry.
Greater flood risk has gone along with higher price tags since 2013, Redfin said, likely because many flood-prone homes are luxury waterfront properties. And during the pandemic, demand for such properties surged as wealthy city-dwellers snapped up getaway homes in coastal areas, Redfin noted. Ironically, those who bought beach houses to escape the pandemic may have exposed themselves to a danger they underestimate.
“Americans are buying the beach houses they always dreamed of because they have the flexibility to work from wherever they want,” Redfin Senior Economist Sheharyar Bokhar said in a statement. “While flood risk is intensifying in many parts of the country, it doesn’t seem to be a deal breaker for a lot of homebuyers. This may be because buyers aren’t aware they’re purchasing a home in a flood plain or just don’t view it as an immediate danger. Places with high flood risk are also often home to large concentrations of retirees, many of whom don’t see climate change as a threat they need to worry about in their lifetime. Florida is one example.”