Natural Disasters Appear to Have Little Impact on Long-Term Home Values in Nation’s Largest Metros
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Natural disasters can be devastating to individuals and communities. The damage is often particularly hard on homeowners, who might witness the destruction of their homes through no fault of their own.
If there’s one silver lining, it’s this: Natural disasters do not appear to have much, if any, lasting impact on the value of most homes in the nation’s 50 largest metros, according to a new study by LendingTree, the nation’s largest online loan marketplace.
To help people better prepare their finances for natural disasters, we ranked the nation’s 50 largest metros by the number of natural disasters that have occurred in them over the past 10 years. We then looked at what kind of impact these disasters had on home prices. While people should certainly be prepared for a natural disaster to strike, this study shows that the majority of people who live in the nation’s largest cities do not need to worry about a natural disaster destroying the long-term value of their home.
- There is virtually no correlation between the number of natural disasters that hit an area and the median home price in that area. This is likely because natural disasters do not strike frequently enough in the nation’s largest metros to have a noticeable impact on home prices. But with ongoing climate change contributing to an increase in the number and intensity of natural disasters, it is possible that, in the future, a more significant correlation could emerge.
- Oklahoma City, Kansas City, Mo., and Los Angeles are the three most disaster-prone metros in our study: Oklahoma City was hit by 30 natural disasters in the past 10 years, while Kansas City and Los Angeles were hit by 25 each. Nonetheless, these areas have seen their respective home values rise by 35%, 25% and 42%, respectively — this is higher than the average increase of 25% across all 50 of the nation’s largest metros.
- Detroit and Las Vegas are the two least disaster-prone metros featured in our study, with Detroit only being hit by only one major disaster in the past decade, while Las Vegas was hit by two. Though these metros were hit by the fewest natural disasters among the 50 largest metros in the nation, their median home values only increased by an average of 27%, which is less than the average increase of 34% in Oklahoma City, Kansas City and Los Angeles.
- The average metro featured in our study was hit by 11 natural disasters over the past decade. As a result, most homeowners in the nation’s largest metros won’t need to deal with more than one natural disaster a year. While these disasters are unlikely to have a serious impact on a home’s long-term value, they could still cause short-term problems for homeowners. As a result, many homeowners may still see some benefit in purchasing insurance that protects against damages caused by natural disasters.
Most disaster-prone metros
No. 1: Oklahoma City
- Number of disasters since 2009: 30
- Types of disasters: Fires, floods, severe ice storms, severe storms, tornadoes
- Median home value in 2009: $123,400
- Median home value in 2019: $166,290
- Home appreciation amount since 2009: $42,890
- Percent increase in median home value from 2009 to 2019: 35%
No. 2 (tie): Kansas City
- Number of disasters since 2009: 25
- Types of disasters: Floods, severe ice storms, severe storms
- Median home value in 2009: $158,500
- Median home value in 2019: $198,053
- Home appreciation amount since 2009: $39,553
- Percent increase in median home value from 2009 to 2019: 25%
No. 2 (tie): Los Angeles
- Number of disasters since 2009: 25
- Types of disasters: Fires, floods, severe storms
- Median home value in 2009: $463,600
- Median home value in 2019: $659,595
- Home appreciation amount since 2009: $195,995
- Percent increase in median home value from 2009 to 2019: 42%
Least disaster-prone metros
No. 1: Detroit
- Number of disasters since 2009: 1
- Types of disasters: Flood
- Median home value in 2009: $139,900
- Median home value in 2019: $177,177
- Home appreciation amount since 2009: $37,277
- Percent increase in median home value from 2009 to 2019: 27%
No. 2: Las Vegas
- Number of disasters since 2009: 2
- Types of disasters: Fire
- Median home value in 2009: $202,100
- Median home value in 2019: $258,895
- Home appreciation amount since 2009: $56,795
- Percent increase in median home value from 2009 to 2019: 28%
How to protect yourself and your home against natural disasters
The easiest way that homeowners can prepare for a disaster is to carry insurance on their home. Depending on the type of coverage, it can help pay for many of the damages that have been caused by a disaster.
Beyond insurance, there are certain steps that you can take to help ease the financial damage that a natural disaster can cause. LendingTree has created several guides to help homeowners pay for their mortgage and protect their credit score during the time immediately following a disaster.
Disasters have such a small impact on long-term home values because they are relatively rare and aren’t necessarily severe enough to cause long-term damage. That being said, one of the major side effects of climate change and global warming is an increase in the frequency and potency of natural disasters. As a result, while natural disasters might not have a huge impact on home prices today, their impact might be more noticable a few decades from now.
The natural disaster data used in this study comes from the Federal Emergency Management Agency, which lists all natural disaster declarations by county in the U.S. over the past several decades. By mapping counties to their respective metropolitan statistical areas (MSAs), we were able to see how many disasters struck each metro featured in our study over the past 10 years.
For this study, disasters that began and ended on the same day were counted as one, even if they were cataloged twiced by FEMA. Furthermore, disasters such as gunfire and explosions were also excluded since this study focuses on disasters commonly referred to as “acts of God.”
The 2009 median housing value and household income and unemployment rate for each MSA is from the 2009 American Community Survey with one-year estimates. This data looks at the median value of owner-occupied homes in the nation’s MSAs.
The 2019 median housing value for each MSA comes from estimates provided to S&P Global by Claritas. The estimates are based on data from the American Community Survey as well as the House Price Index from the Federal Housing Finance Agency and the Case-Shiller house price index. As with the American Community Survey, this value looks at owner-occupied homes in the nation’s metropolitan statistical areas.
American households own $29.2 trillion of residential real estate, a significant part of the $107 trillion in household net worth in the United States. Financial assets add $87.7 trillion to …