Climate and real estate in the US: problems with the bubble

New research shows that homes built in flood zones, storm surge zones, regions with deteriorating water supplies, and wildfire-prone areas of the West are overvalued by hundreds of billions of dollars, creating a real estate market bubble and putting the U.S. financial system at risk.

The problem will worsen as sea levels rise and storm precipitation intensifies if unwise building practices continue. However, increased awareness of climate risks, more realistic pricing of flood insurance, and reform of public disaster policy can reduce this overestimation and the risk of an economically devastating burst''bubble.

Climate futurologist Alex Steffen described this real estate bubble, exacerbated by climate change, as follows: "As risk awareness increases, the financial value of risky places falls. If the cost of securing that risk exceeds the value of a place that decision-makers consider reasonable, it simply won't be secured. It will be informally abandoned. This will create even more problems.