The U.S. housing market has witnessed a series of ebbs and flows in recent years. However, according to a recent Gallup poll, the current scenario paints a rather bleak picture, with a mere 21% of Americans believing it’s a good time to buy a house.
This historically low perception is not just a result of the current challenges the real estate market is facing such as record low inventory, and rising mortgage rates, but is also deeply intertwined with growing concerns about climate change.
Recent research by Zillow reveals that a staggering 80% of prospective home buyers, mostly millennials and Gen Z shoppers, are now taking climate risks into account when making their purchasing decisions.
As potential homebuyers navigate the complexities of the current real estate market, they find themselves at the crossroads of economic challenges and climate anxieties.
Historical Context Meets Modern Concerns
Historically, the U.S. housing market has experienced prolonged phases of optimism. In 2003, during a period of rising homeownership rates and housing prices, 81% of Americans believed it was an opportune time to purchase a home.
Yet, the present sentiment of only 21% of home buyers think it is a good time to buy is at its lowest since Gallup began its surveys in 1978.
While economic factors play a significant role in this pessimism, an emerging factor is adding to the hesitancy: the increasing threat of climate-related risks.
As of September 2023, 23 verified weather/climate-related disasters have been confirmed. These incidents led to the loss of 253 lives and caused substantial economic impacts in the affected regions.
As home buyers consider their options, they’re not just looking at price tags and interest rates but also evaluating their potential homes’ long-term safety and values against environmental threats.
The Zillow report found a clear regional difference regarding climate anxiety among prospective home buyers.
The Western states stand out with the highest level of concern. A whopping 90% of potential buyers in the West considered at least one climate risk when looking for a home.
Furthermore, 59% of these buyers believe climate risks are “very” or “extremely impactful” to their decision-making process. This indicates a heightened sense of urgency and concern in the West regarding the effects of climate change on real estate.
On the other hand, the Midwestern states show the lowest level of climate anxiety among the regions.
While 77% of potential buyers there considered climate risks, which is still significant, it’s the lowest percentage among all regions. Only 42% of Midwestern buyers also view these risks as “very” or “extremely impactful.”
Additionally, 34% feel that climate risks are “not at all” or “not very impactful,” suggesting a more relaxed attitude towards climate-related concerns in the Midwest compared to other regions.
While climate anxiety is a prevalent concern across the U.S., it’s most pronounced in the West and least evident in the Midwest.
The Affordability-Climate Conundrum
For potential buyers, the decision-making process has become multifaceted. High housing prices coupled with rising interest rates already pose a significant challenge.
Add to this the looming threat of climate-related damages, and the decision becomes even more complex.
A house might be affordable today, but will it remain safe and viable in the face of rising sea levels, wildfires, or extreme weather events?
Predicting the Future – A Climate Twist:
While the Gallup poll indicates that fewer Americans expect a rise in housing prices, there’s an underlying concern worth noting. The long-term viability of selling your house, especially in areas prone to climate risks, is becoming a significant factor in the expectations of home buyers.
As climate predictions point towards increased severity and frequency of extreme events, potential buyers are factoring in these risks more than ever before.
Real Estate’s Evolving Definition of “Value”
This shift in buyer sentiment could have profound implications for the future real estate market. Areas historically seen as prime real estate, such as California, Florida, and Colorado, might experience a decline in demand if they are perceived as high-risk due to climate threats.
Consequently, property values in these areas could stagnate or even decrease. Conversely, regions deemed safe from climate impacts might see a surge in demand, leading to increased property values and a competitive housing market.
Real estate developers and agents must adapt to this new landscape, possibly focusing on building and promoting properties with climate-resilient features.
Additionally, transparency about a property’s vulnerability to climate risks will become crucial in the buying and selling process.
In essence, the real estate market of the future will not just be driven by location and amenities but also by the evolving perceptions of climate safety.
Despite the challenges, the American spirit remains resilient. Many still view real estate as a valuable long-term investment. However, the criteria for what constitutes a “good investment” are undergoing a transformation.
It’s no longer just about economic returns. A property’s resilience to climate risks, environmental footprint, and adaptability to a changing world are crucial factors in determining a home’s value.
The Future Real Estate Market
The U.S. housing market stands at a unique juncture, influenced by economic and environmental factors.
For a robust rebound, there’s a need for a more holistic approach that addresses economic challenges and recognizes and mitigates potential buyers’ growing climate anxieties.
As the world grapples with the realities of climate change, the housing market will undoubtedly need to adapt, innovate, and evolve.