PBS Terra asks 'Will Climate Change Pop the Housing Bubble?'

One of the stories I've been following but haven't blogged about here yet is how climate change and extreme weather have caused insurance companies to stop writing policies in California and raise rates in Florida. I think I was just waiting for the right video to come along. Fortunately, PBS Terra uploaded that video Tuesday when it asked Will Climate Change Pop the Housing Bubble?

Remember the 2008 Financial Crisis? Experts warn that the same thing may be happening again, but this time, CLIMATE CHANGE is the culprit. Increasing natural hazards, from wildfires and hurricanes to rising sea levels and catastrophic flooding are threatening the very foundation of our real estate system in huge swaths of the country. State Farm, All State and Farmers Insurance all stopped writing new policies in the entire state of California. And we're seeing similar stories unravel in other states due to different threats, like in Florida and Louisiana. Could the real estate bubble be popping? Where else might be affected?

My answer to the question is by itself, no, but climate change is likely to make the coming real estate price drop worse, at least in places where climate-fueled weather disasters have become more common and severe. Real estate prices follow the Kuznets Cycle, a fifteen-to-twenty year rise and fall that reflects infrastructure investment and supply, which then has effects on demand. This averages out to eighteen years. It was because I knew about this cycle that I was able to recognize the signs of a market top in 2005 and sell in 2006. I also recognized the signs of coming out of a market bottom in 2014, which helped create the conditions for my wife and I to buy a house that year. Eighteen years after the last market top in 2005 is 2023, so residential real estate prices falling are already baked into the cake. We are due. Both the graph in the video and the one below that I included in The tax bill and the U.S. economy in 2018 and beyond that still updates show that home prices may have already peaked.


First, the pandemic helped push up already rising home values, as I mentioned most recently in CNBC explains the problems of suburbia and their possible solutions.

The irony of the pandemic, as the first video points out, is that "it looks like more affluent people are taking the opportunity to move into better housing in the suburbs. If one has to shelter in place, then one might find a better place to find shelter." Let's see how long that lasts as gas prices rise while workers return to the office.

Then the public health emergencies ended, accelerating the trend of returning to physical work, as I already have. Oh, and the Federal Reserve has been raising interest rates, making borrowing more expensive. All of those may have contributed to the dip in home prices during the past couple of years followed by a recent rise near to the previous high. I expect that to be followed by stagnation, if not an outright drop. That will be especially true in parts of the country where insurers will no longer write new policies to for homeowners that satisfy the conditions of their mortgages.

That written, climate change may actually help support real estate prices in markets like the ones in PBS Terra reveals 'the Safest Place to Live as the Climate Changes', CNBC asks 'Which U.S. Cities Are Safest From Climate Change?', CityNerd lists 'Ten Lovely Cities You Can Migrate To and (Maybe) Survive Climate Havoc', and Michigan, which could become a climate safe haven. Silver linings, at least for some of us.