It’s still too soon to fully calculate the cost of the Los Angeles wildfires, but one thing is clear: The cost of insurance will go up, and that will affect not just the value of LA real estate but of real estate across the nation.
The losses from those wildfires may seem unimaginable now, but they were actually already part of a calculation that climate risk experts have been modeling recently as they attempt to measure the effects of climate change on home values.
By 2055, 84% of all U.S. homes may see some drop in value, totaling $1.47 trillion in losses, according to an analysis by First Street, a climate-risk firm.
“Climate change is no longer a theoretical concern – it is a measurable force reshaping real estate markets and regional economies across the United States,” said Jeremy Porter, head of climate implications research at First Street.
According to the report, insurance is expected to grow by a national average of 25% over the next 30 years, with 14% of that due to current underpricing of risk and the additional 11% due to increasing climate risk over that time period. The property value impact on average is only about -3% nationally, but there are some areas that are expected to lose a significant amount of their value. Roughly a dozen counties in Texas, Florida and Louisiana could see home values cut in half, according to the report.
Dave Burt, founder of DeltaTerra Capital, is also calculating climate risk to real estate.
DeltaTerra is an investment research…
