Analysis of sales data and flood risk data over two decades indicates that housing markets fail to fully account for information about flood risk. The findings suggest that policies to improve risk communication could influence market outcomes.

«The overvaluation we find is really concerning, especially given the increases in climate risk that are coming our way,» said study lead author Miyuki Hino, who was a PhD student in the Emmett Interdisciplinary Program in Environment and Resources in Stanford’s School of Earth, Energy & Environmental Sciences (Stanford Earth) at the time of the research and is now an assistant professor in the University of North Carolina at Chapel Hill’s department of city and regional planning. «Improving how we communicate about flooding is an important step in the right direction.»

Water hazard

In some states, such as Florida, as many as one in six homes are in floodplains. As more people have built more homes in areas exposed to cyclones, sea-level rise and other inundation hazards, flooding damage costs have skyrocketed. Since 2000, overall flood damages have quadrupled in the U.S.

More frequent extreme weather could magnify the trend. In the next 30 years, flood damages to U.S. homes are projected to rise more than 60 percent, from $20 billion to nearly $32.2 billion a year, according to nonprofit research group First Street Foundation.

While some states, such as Louisiana, require detailed flood risk disclosures, others require no risk disclosures of any kind. Only two states require that sellers disclose the cost of their insurance policy — an additional cost burden for the buyer. Most states only require disclosures by the time the contract is signed, making them unlikely to inform buyers’ decisions.

Story Source:
Materials provided by Stanford University. Original written by Rob Jordan. Note: Content may be edited for style and length.