A new report warns that as natural disasters and severe weather become more frequent, the value of the U.S. real estate market could plummet by over a trillion dollars. This decline is tied to a shift in where Americans choose to live, moving away from high-risk areas to places deemed more resilient.

However, this major shift in population due to climate concerns, known as the great climate migration, is not expected to follow a straightforward path. Many Americans may continue to settle in areas with significant risks because of appealing local amenities and economic opportunities that make them enticing despite the increasing climate-related costs.

The report, titled “Property Prices in Peril,” from the climate analytics firm First Street, classifies neighborhoods across the U.S. into several distinct categories.

Neighborhoods deemed “climate abandonment” are witnessing a population drop due to high risks and rising insurance costs; “risky growth” areas experience high threats and increasing premiums but still attract newcomers due to social and economic advantages; “climate resilient” areas draw in residents because their associated risks and costs remain manageable. Additionally, “tipping points” identify regions that are at risk of losing population, while another category highlights areas with minimal climate threats that are still facing a decline due to a lack of jobs and opportunities.

Remarkably, the report predicts that “risky growth” regions, such as major metropolitan areas in Texas, could see a significant 76% increase in population over the next 30 years, while “climate abandonment” regions are expected to experience a 38% population decline.

First Street estimates that, on average, property values in “risky growth” areas might drop by 1.7% over the next three decades. This figure varies, with some locations like Tampa, Florida, projected to experience a drop of up to 25%. In contrast, “climate abandonment” areas may face even sharper declines, averaging around 6.2%.

Overall, First Street anticipates that real estate values could decrease by over $1 trillion by 2055. This is due to a combination of people vacating areas witnessing growth currently and necessary adjustments in property values to align with rising insurance prices.

Real Estate Trends Are Localized

Another vital takeaway from First Street’s ongoing analysis of climate risk – which YSL News first highlighted in October – is that risks can vary significantly even within a single city or metropolitan area. Different neighborhoods might fall into various categories, and people typically have a history of moving from higher-risk areas to safer neighborhoods.

According to Jeremy Porter, First Street’s head of climate implications research, “In general climate migration, we don’t observe vast movements of people from large cities like Houston or Miami to areas like Minnesota or Michigan.”

“Instead, what tends to happen is—within cities—people want to stay close to their families, maintain their jobs, and keep their children in the same schools, but they seek out neighborhoods that are less risky in those metropolitan areas,” he added.

This suggests that it might be more precise to label cities and metropolitan areas based on high or low climate risk levels. A particular “risky growth” area within a city might offer better schools and more appealing homes, which could lead it to become a “tipping point” before it shifts into a “climate abandonment” category when enough people choose to leave.

Identifying America’s Climate Safe Zones

While Porter hesitates to label specific places as “climate havens,” First Street’s report highlights certain regions in the Midwest, such as Dane County, Wisconsin, and Franklin County, Ohio, as likely to be resilient in the coming decades.

Forecasting the impacts of climate change on housing is inherently complex and continually evolving. As climate change accelerates, Americans may be making living decisions in response to these threats more quickly than ever before.

“We certainly track various patterns across all five categories,” Porter noted. “There’s an observable increase in how quickly people are reacting to climate risk, particularly given the surge in frequent and severe climate events we are witnessing.”

Moreover, Porter believes the availability of climate data for potential homebuyers is contributing to heightened awareness. “People are becoming more conscious of these risks.”