More natural disasters around the nation are driving home financing risks, which more buyers and sellers are grappling with than ever before. As reported by NMP last month, unpriced climate risks pose myriad threats to the housing finance ecosystem for borrowers, lenders, servicers, and investors.
A new report from Realtor.com showed that 32.5% of homes are now at risk of extreme heat, 18.1% are at risk of wind gusts exceeding 50 miles per hour and 9% are at risk of poor air quality. With all of these dangers combined, that means 40.4% of U.S. homes, valued at $19.7 trillion, are at severe or extreme risk when it comes to heat, wind, and air quality.
These weather conditions not only threaten a home's structural integrity, threatening homeowners' home equity, but can price homeowners out of insurance or even prevent people from being approved for a home loan altogether.
In response to the potential impacts of this new research, Realtor.com® launched three new products on its website through a partnership with climate fintech First Street. With the announcement, company officials said they hope to provide consumers with more knowledge to measure the heat, wind, and air factors of the properties they are buying or selling.
"Realtor.com® currently offers users an in-depth look at fire and flood risks,” Chief Product and Technology Officer Mausam Bhatt said. “When you consider the percentage of American homes, and the value at risk, against factors like extreme heat, air quality and wind, it was imperative for us to deliver more robust and comprehensive climate risk information to our users. It's important for people to fully understand the climate risks that a home faces not only in the present, but in the future, so they can make the most informed decision for one of the biggest purchases and investments they will make in their life."
In an interview with NMP, Dan Coates, deputy director of the Federal Housing Finance Authority’s Division of Research and Statistics and Chairman of the FHFA Climate Change and ESG Steering Committee, shared implications of climate change based upon the group’s research.
“Regardless of whether you call it global warming or climate change, or whether you think the cause is humans or something else, that's not our area of focus,” Coates said. “Our area of focus is making sure that our regulated entities can keep doing what they're doing and remain safe and sound so that they can continue to achieve their housing finance mission, which makes homes and affordable rental properties available to populations all around the country.”
The agency’s review found that climate risks are at least partially capitalized in housing values and influence lending and consumer behavior. Next month, housing finance professionals, federal housing officials, and climate scientists will be gathering at the "Going To Extremes" summit in National Harbor, Maryland, to address this escalating issue.
