10 Key takeaways

Climate risk is materially reshaping US housing markets through insurance costs, physical hazards, and migration. Property value losses could reach US$1.2 trillion by 2055. Around 84% of census tracts face negative impacts. Insurance affordability is a key driver, with rising premiums reducing demand. High-risk regions face concentrated losses, while lower-risk areas may gain population and value. Climate migration will alter regional housing dynamics. Economic effects include shifts in local tax bases and GDP. Investors must integrate forward-looking climate risk data. Market repricing is already underway. Adaptation measures may mitigate some losses but are unevenly applied.

Climate risk’s impact on real estate markets

Climate hazards including flooding, wildfire, wind, and extreme heat are increasingly reflected in property valuations. The report highlights that insurance cost escalation is the primary mechanism transmitting climate risk into housing markets. As premiums rise or insurers withdraw, affordability declines, leading to reduced buyer demand and falling prices. High-risk coastal and wildfire-prone areas are expected to see the most significant devaluation, while lower-risk regions may benefit from increased demand. This dynamic contributes to a structural repricing of residential real estate based on future risk exposure rather than historical trends.

Methodology

The analysis uses forward-looking climate models to estimate property-level risk exposure across multiple hazard types. These projections are combined with insurance pricing assumptions and economic modelling to assess impacts on property values and migration patterns. The approach contrasts with traditional backward-looking assessments by incorporating anticipated changes in hazard frequency and severity. The methodology evaluates both direct physical risks and indirect economic channels, such as insurance costs and population shifts, to produce a comprehensive national risk assessment.

National risk assessment

The report finds that 84% of US census tracts are projected to experience some level of property value decline due to climate risk. Aggregate residential losses are estimated at approximately US$1.2 trillion by 2055. High-risk areas, particularly those exposed to flooding and wildfire, face the largest declines. Conversely, some lower-risk regions may experience value increases due to inward migration. The assessment highlights uneven geographic impacts, with climate risk creating both declining and emerging housing markets across the country.

Implications and discussion

The findings suggest significant implications for homeowners, investors, insurers, and policymakers. Declining property values in high-risk areas may reduce household wealth and local government revenues, while increasing inequality between regions. Investors are encouraged to incorporate climate risk into valuation, underwriting, and portfolio strategies. The report also underscores the importance of adaptation measures, such as resilience investments and updated building standards, to mitigate risks. However, uneven implementation may limit their effectiveness, reinforcing disparities in market outcomes.