New research suggests coastal homeowners worried about rising seas are selling their houses at bargain rates.
By Marlene Cimons
David Fisher worries about what could happen to his home on Fire Island in an era of rising seas. The two-story wood-and-glass house is only 75 feet from Great South Bay and sits less than four feet above the water level. Since watching water seep into his house during Superstorm Sandy in 2012, he has struggled over whether to sell the property now, while he still can, or to enjoy a few more years in the home where he and his wife spend much of their summers.
“I think about reality, and I realize that holding onto it is a gamble, and eventually it’s not going to be there,” said Fisher, 73, a book author whose primary home is Manhattan. “In fact, I think eventually Fire Island is going to disappear.”
His friend Herb Cohn, 77, has no such fears. Two years ago he sold his house, located a few blocks from Fisher’s, but anxiety over climate change had nothing to do with it. The sale was part of his divorce, and he would buy there again in a heartbeat if he could. He scoffs at the decades of research showing humans are heating the planet.
The friends’ disparate views about climate change aren’t just fodder for Facebook debates. Their beliefs may actually exert a measurable influence on real estate values, according to a new study. Researchers found that climate deniers, like Cohn, stand a better chance at getting more money for their homes, when compared to those who accept climate science, like Fisher.
“Climate change never factors into my decisions to buy or sell,” said Cohn, who traded his home for double what he paid for it 30 years ago. His optimism about the future may have paid off, researchers say.
A segment of Fire Island with six feet of sea level rise. The areas shaded in light blue would be under water. Source: Climate Central
“An important component of how to figure out how much to pay for real estate property has to do with how you think about the future,” said Markus Baldauf, assistant professor of finance at the University of British Colombia Sauder School of Business and a study co-author. “If you think that the plot of land might become permanently flooded in the future, then you would pay less.”
Several studies have examined the impact of climate change on real estate, including some that predict dire consequences for investors who fail to account for the risks of extreme weather, sea level rise, storm surge, and wildfires in making property investment decisions. But the UBC research takes a novel approach, looking instead at how price trends fluctuate based on the attitude that sellers have toward climate change.
The scientists evaluated public opinion data from the Yale Program on Climate Change Communication, data on home sales from Zillow, and predictions of sea level rise from the National Oceanic and Atmospheric Administration. They controlled for a range of factors, including the characteristics of different houses and the political preferences of residents.
“We then compute the price difference between a property that is projected to be flooded compared to one that is not,” Baldauf said. “We do this separately for ‘believer’ and ‘denier’ areas. And we find that the discount for properties likely to be flooded is greater in ‘believer’ than ‘denier’ areas.”
The proportion of adults who understand that humans are changing the climate in every county in Florida. Source: Yale Program on Climate Change Communication
The price difference amounted to about 7 percent, according to the study. Notably, Baldauf said it was impossible to predict who had correctly valued coastal property, the global warming deniers or their climate-conscious counterparts.
“It could be that they are both wrong,” he said. “All our study says is that they can’t all be right.”
The researchers, who also included UBC Sauder professor Lorenzo Garlappi and University of Chicago assistant professor Constantine Yannelis, published their findings in the journal The Review of Financial Studies.
Flooding is already hurting property values. Between 2005 and 2017, flooding led to a net loss of $16 billion in real estate value in coastal communities from Texas to Maine, according to research from First Street Foundation.
If humans fail to curb carbon pollution, sea levels could rise by as much as six feet by the end of this century, submerging an estimated 2 percent of American homes worth roughly $882 billion, according to a 2017 Zillow report. Authors found that more than one in eight Florida homes could be under water, while nearly one in 10 properties in Hawaii face similar danger.
Investors have always weighed the risk of natural disasters when looking at real estate. However, while they previously looked to past weather events to determine prices, in recent years, they have begun to consider future climate-related mayhem in making decisions.
Congresswoman Donna Shalala, Democrat of Florida, whose district includes Miami Beach, acknowledged the findings of a 2018 study that suggested rising seas have already suppressed coastal property values in the Miami area. However, she said that, in her district, she doesn’t see the polarization that Baldauf describes, as people in South Florida overwhelmingly accept the fact of climate change.
“There aren’t many climate deniers in South Florida,” she said. “We realize that, for us, it’s life or death.”
Shalala emphasized that local governments can take steps to protect coastal properties, which could help keep to home values aloft. She said that measures taken by her city have made residents feel more secure about their properties. As a result of those measures, Miami’s municipal bond ratings have improved, she said.
“Miami Beach has raised sea walls and streets, installed pumps and approved stronger building codes, including for hurricane-proof windows,” she said. “When people think it’s the end of Miami, they need to come down and see what Miami Beach has done. It has done a lot of things that residents feel have made a difference.”
Fisher, for one, is counting on his Long Island town’s beach restoration program — which replaces disappearing sand with new sand — to protect his house in the coming years.
“Our beach is in excellent shape right now,” he said. “Still, there’s no question there’s going to be more water, and the water’s going to be higher. I don’t deny it, and I do worry about it. But I remain hopeful that whatever’s going to happen doesn’t happen in my lifetime.”
Fisher doesn’t want to have to give up his summer home, saying that he has loved Fire Island since the moment he first set foot on it in 1973.
“There hasn’t been a day since that I haven’t been in love with it,” he said. “It’s my peaceful place. Everything is better when I am there.”Share This