Demand for properties along the water is expected to decrease as the likelihood of climate-related damage grows.(GETTY IMAGES)

How Climate Change Could Impact Your Home Value

With sea level rise accelerating, waterfront real estate values could be revalued sooner than you think.

By Geoff Williams March 29, 2019, at 1:50 p.m.

In 2018, the Federal Emergency Management Agency announced that it would be updating New York City's flood maps as a result of rising sea levels and shifting climate change forecasts. After all, in New York City, it's been estimated that approximately 80 percent of the property owners who have experienced flood damage since the maps were last updated in 1983 didn't have flood insurance.

If you live in an area that has been plagued by floods, fires or beach erosion, or if you are concerned because 2014 to 2018 were the warmest years on record, you may be asking yourself: "How will climate change impact my home's value?"

Climate change could impact your home's value in several ways, including:

• Less demand for waterfront homes.

• Higher insurance premiums.

• Higher property taxes.

• Increased property values for some homeowners.

While it's impossible to predict the future, the consequences of rising temperatures and sea levels and increasing flood-prone areas could result in adjusted home values. Below are climate change projections and factors that will likely significantly alter property values, according to experts.

Less Demand for Waterfront Homes

So far, there hasn't been a reason for homeowners in beach areas to panic, but in 2015 a study from the University of North Carolina Wilmington found that oceanfront property values could drop across beachfront property in the United States if federal subsidies were eliminated. For instance, in New Jersey, it would fall up to 34 percent. And a January 2019 study from Columbia University and the nonprofit First Street Foundation gave waterfront home owners a reason to worry. The study looked at 2.5 million coastal properties in Massachusetts, Maine, New Hampshire and Rhode Island between 2005 and 2017, and found that increased tidal flooding caused by sea levels rising have caused homes to depreciate in value by $403.1 million.

And in February, Columbia and First Street released another study suggesting that the Eastern Seaboard has lost $15.8 billion in home values.

Bruce Ailion, a realtor and attorney with Re/Max Town & Country, in Alpharetta, Georgia, says he's looked for several years for Gulf-front property. Two years ago, he was close to settling on an oceanfront duplex in Puerto Rico for only $210,000. He reluctantly decided not to buy it.

A month later, Hurricane Maria ravaged Puerto Rico. "If we had gone ahead (and closed on the property), we might only have an empty lot and a mortgage," Ailion says. Ailion suspects that he isn't the only one who has backed out of buying beachfront property because of worries about climate change. "It's very serious. Serious enough to keep me, and perhaps hundreds of thousands, out of the market," he says. If he does decide to ever live on the ocean, Ailion says that he is "more inclined to rent and allow someone else to take the risk of maintenance and loss."

That said, home prices fluctuate, depending on the region, among other factors. The entire East Coast has been impacted by hurricanes over the last few years, with Hurricane Harvey, Irma and Maria in 2017, as well as other disasters like Hurricane Matthew and Hermine in 2016, Hurricane Arthur in 2014 and Superstorm Sandy in 2012. However, Paul Grover, a real estate agent and co-founder of the real estate company Robert Paul Properties, says that in Massachusetts coastal communities "there's an increased awareness of the effects that climate change can have on a property, but overall it has not impacted home values."

Grover adds that homeowners do often discuss the possibilities of climate-related damage with their real estate agents, however. "While buyers have certainly become more mindful of characteristics such as elevation and vegetation that can prevent erosion, waterfront markets remain strong throughout the state," he says.

Higher Insurance Premiums

Assuming extreme weather patterns continue, it seems inevitable that premiums will continue to climb.

"I sell insurance in Marin County, California, a county that has both super expensive homes and has recently seen the FEMA maps change," says Scott Johnson, a manager and principle broker agent of Marindependent Insurance Services LLC in Mill Valley, California. He says many of his clients were in zones that FEMA considered safe from flooding that are now in zones that FEMA considers risky, which caused a sharp spike in insurance rates.

Homeowners are angry, Johnson says. While he doesn't know for sure why insurance has gone up in the area, Johnson says he has his suspicions. "Part of the problem is that river and water systems in this county have changed, part of the problem is that the county and state have failed to keep up with the issue and part of the issue is higher and lower king tides (the highest naturally occurring tides), and potentially more extreme weather systems," he says. "We had an atmospheric river system that came through this county several years ago that dropped over 20 inches of rain in 24 hours. It was not a hurricane, just a storm," he adds.

Higher Property Taxes

2014 study by the Union of Concerned Scientists suggests that by 2045, some cities, like Atlantic City and Cape May, New Jersey, can expect to see tidal flooding 240 times or more per year.

Many government officials say that if some communities are routinely swamped, residents will naturally move away. So theoretically, if you live in an area of the country that routinely sees flooding and has fewer residents and thus a smaller tax base, you could see your property taxes climb significantly. After all, somebody has to pay for your community's infrastructure.

And you don't have to be near the coast to see your property values lowered due to climate change. A 2017 study from Ohio State University estimated that due to excessive algae, a result of warmer weather, Ohio homeowners who live near Buckeye Lake and Grand Lake saw their combined property values decrease by $152 million from 2009 to 2015.

Increased Property Values for Some Homeowners

There are always going to be winners and losers in a fickle real estate market as climate change continues to take a toll on property values. That's why Jeff Fagan, president of the Orlando Regional Realtor Association, predicts that his city, as far as home values go, will likely soar, even as the effects of climate change continue to batter beachfront properties in Florida.

"Miami and Orlando respectively are the top two markets for vacation homes in Florida. Buyers are becoming aware of the risks of beachfront properties, the potential challenges, and costs of flood insurance. Orlando will almost certainly see an increase in demand as more vacation home buyers turn toward inland destinations and away from coastal locations," Fagan says.

Ailion, meanwhile, says that inland, Georgia has done well with waterfront living – for homeowners who want to live near lakes. "Brokers at my company are killing it," he says. But even there, he says, there have been risks. "Within the last 10 years, we have had a drought where water levels were down," Ailion says. "One or two seasons, docks sat above dry land instead of water, and local business reliant on tourism closed. I think we will continue to see dislocation associated with climate issues."