Homebuyers are still paying up for climate risk
From proximity to a hospital or transportation hub to walking distance from restaurants and shopping, a confluence of so-called “community factors” drive homebuyer preferences and thus the relative attractiveness and value of a given residential property.
The likelihood a home may flood or face heightened exposure to wildfires or tornados has become an increasingly urgent consideration for shoppers watching unpriced climate risks rapidly raise the carrying costs of homeownership through surging property insurance premiums, taxes and homeowners association (HOA) fees.
“Price is still the biggest motivator for a lot of home shoppers, even in places where climate risk is well known,” said Jiayi Xu, an economist at Realtor.com, commenting in a recent analysis from the listing platform.
The Realtor.com report, which analyzed listings data from June 2025 to May 2026, found that U.S. homebuyers could observe either a pricing discount or a pricing premium on high-risk homes depending on their location.
In California’s Santa Clara County, for example, which contains San Jose, homes facing severe or extreme risk are discounted at 78% of the price of properties without severe or extreme risk per square foot. Those listings also draw nearly 50% more views, as the lower price attracts greater attention.
On the opposite coast in Anne Arundel County, Md., located along the Chesapeake Bay south of Baltimore and east of Washington, D.C., homes with severe or extreme climate exposure are priced about 44% more per square foot than homes without commensurate risk. Purchasers of that risk, the report said, will pay up for Chesapeake Bay waterfront access.
“But that doesn’t mean the risk disappears. It shows up later,” added Xu, “often after the sale is already done.”
A shortage of affordable single-family homes and persistent affordability challenges mean high-risk homes remain crucial housing stock, despite the financial gamble they represent as natural disasters grow more frequent and severe.
More than 23% of U.S. homes face severe or extreme climate risk from wind, flood or wildfire, according to Realtor.com’s Housing and Climate Risk Report for 2026, published Thursday. That represents about $11.2 trillion of exposed value, “making climate risk one of the most significant and underpriced factors in the American housing market.”
Those climate risks are impacting mortgage performance and property values in “clear and measurable ways,” said ICE Mortgage Technology in April.
A key way that happens is through the capitalization of higher property insurance, taxes, HOA costs or even rising utility bills into property values. As ongoing monthly costs of a given property increase, the amount a future buyer may be willing or able to pay for that asset typically diminishes.
Homes facing severe or extreme risk had a median HOA fee of $192, according to Realtor.com’s review of its listings data from June 2025 to May 2026, compared with $125 for lower-risk homes, a gap of 53.6%.
“Having the full financial picture, including future insurance costs and coverage availability, matters just as much as the purchase price,” concluded Xu. “There’s nothing wrong with choosing a high-risk area for affordability or lifestyle, as long as it’s an informed choice.”
