High flood risk homes selling for more than lower-risk houses
While coastal properties have always fetched top dollar, insurance premiums for these locations have surged to historic highs.
During the first quarter of 2021, the median selling price for homes with a high flood risk was $402,010, almost $50,000 more than houses with low flood risks, according to Redfin, which noted the premium paid for waterfront properties hit a record 13.6%. In Q1 2020, the premium was around 10%.
On top of this, home sales in flood-prone areas are also surging with an 18.6% year-on-year increase during 2021’s first quarter, the real estate brokerage reported. Sales of low flood risk homes rose about half that, 9.6%, during the period.
“Americans are buying the beach houses they always dreamed of because they have the flexibility to work from wherever they want,” Sheharyar Bokhari, Redfin senior economist, said in a release. “While flood risk is intensifying in many parts of the country, it doesn’t seem to be a deal-breaker for a lot of homebuyers. This may be because buyers aren’t aware they’re purchasing a home in a flood plain or just don’t view it as an immediate danger. Places with high flood risk are also often home to large concentrations of retirees, many of whom don’t see climate change as a threat they need to worry about in their lifetime. Florida is one example.”
Although homebuyers typically inquire about a house’s flood risk, the information doesn’t push them away from the deal in most cases, according to Heather Kruayai, a Redfin real estate agent in Jacksonville, Fla. She noted most people seeking property along Florida’s coast understand the risk. Those attempting to negotiate a lower price due to flood risks are having a tough time right now due to the hot seller’s market.
Although buyers often dream of beachfront homes, sellers of houses in low flood risk areas are seeing higher closing prices. During the first quarter, slightly more than 47% of homes in low-risk areas sold for more than they were listed for, compared with 37.4% of homes with high flood risks, Redfin reported. Because low-risk properties lack million-dollar views in most cases, they are typically more affordable. This makes competition fiercer for those properties and buyers more likely to bid up the price.
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