In the recent Freddie Mac Research Note “Sea Level Rise and Impact on Home Prices in Coastal Florida,” analysis showed that home prices in coastal Florida may not be taking into account the future risk of rising sea levels.

Low-lying and located in a tropical cyclone zone, Florida faces numerous climate hazards, including exposure to storm surge and tidal flooding. These existing natural disaster risks are exacerbated by the state’s future sea level rise (SLR) risk.

Over the next few decades, sea levels are estimated to rise several feet, according to several projections under different scenarios. For example, the National Oceanic and Atmospheric Administration (NOAA) predicts that, under its intermediate-high scenario, the sea level will rise by 6.3 feet in the Florida coast by the end of the century.

Since 2000, demand for coastline properties has tripled. Sea level rise risk poses long-term challenges for coastal communities across the country and adds another layer of risk to existing flood risk.
 
— Ajita Atreya, Senior Macro & Housing Economist, Freddie Mac

The areas in coastal Florida at risk from this projected 6-feet SLR — what we’re calling SLR exposed areas — often overlap with FEMA-designated 100-year floodplains (87% in our sample), where homeowners are required to have flood insurance and home prices are lower commensurate with the cost of that insurance.

However, in SLR exposed areas not within FEMA-designated floodplains, our analysis showed that home prices are not discounted. In fact, we found instead a price premium of 3.5% for these homes.

These were some key findings from our analysis:

  • Homes at risk from future SLR outside of FEMA-designated floodplains are not sold at discounted prices.
  • That is true regardless of the type of homebuyer, whether an owner seeking a primary residence, an individual investor or an institutional investor.
  • Homes in SLR exposed areas are discounted following flooding caused by a hurricane, likely driven by buyers’ perception of a heightened flood risk, rather than SLR risk.

We conclude that homebuyers either lack of awareness of SLR risk or consider it a long-term risk that will not be a concern during the time they own the home.

The absence of price adjustments for SLR now could mean decreases in home prices later, as sea levels rise or FEMA flood maps are updated to reflect SLR. Especially in Florida communities where a large share of homes are in SLR exposed areas and floodplains, this would significantly impact local housing markets.

To learn more about sea level rise and its impact on home prices in coastal Florida, including data sources and analysis methodology, read the full “Sea Level Rise and Impact on Home Prices in Coastal Florida” Research Note.

Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac’s economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac’s business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution. Alteration of this document or its content is strictly prohibited. ©2024 by Freddie Mac.