Homes in high fire-risk metropolitan areas are selling for nearly $120,000 more than homes in low-fire-risk areas, according to a new report from Redfin published on Monday.
Typical high-risk homes sold for $550,500 in April, while typical low-risk home sold for $431.300, a 27.6% difference, the brokerage found. In comparison, two years ago the price difference was $56,700. In addition, the median sale price of a high-risk home rose 51.7% during pandemic, while the median sale price of a low-risk home rose 40.9% during the same time period.
Wildfires in the U.S. have become more and more catastrophic in recent years, with the National Interagency Fire Center reporting that the most destructive wildfire years, in terms of average burned, have all occurred within the past 10 years.
Research has shown that although homebuyers are concerned about climate risk when deciding where to buy, it is not a dealbreaker, as factors such as relative affordability, home size, and proximity to family and friends takes precedence.
“Pandemic buyers also hunted for deals due to surging home prices, and while fire-prone homes aren’t cheaper on average, buyers may feel they’re getting more bang for their buck because they’re getting more space,” Sheharyar Bokhari, Redfin’s senior economist, said in a statement. “And for some pandemic buyers, the fire-prone home they bought in suburbia was actually cheaper than their last home because they were relocating from somewhere like San Francisco or Seattle.”
However, Corey Keach, a Redfin agent in Boulder, Colorado added: “As the market cools and shifts more in buyers’ favor, buyers may start thinking more about climate risk. My advice for house hunters in fire-prone areas is to look at newly built homes, which are more likely to have sprinkler systems and concrete-board siding instead of wood siding.”
The report combined fire-risk data from ClimateCheck, with MLS data in roughly 700 U.S. metropolitan areas. ClimateCheck assigns six different fire-risk categories to properties across the U.S.: very low risk, low risk, moderate risk, high risk, very high risk and extreme risk. For the purposes of this report, a high-risk property is one that falls into the high, very high or extreme category, while a low-risk property is one that falls into the very low, low or moderate category. The climate risk data used in the report is from March 31, 2021.
Experts believe that this price differential has come about as, homebuyers have flocked the suburb, where homes are more likely to face fire risk due to the proximity to flammable vegetation. Additionally, fire-prone homes have historically gone for higher prices, as they tend to be located in expensive West Coast metro areas and larger in size.
The typical high-fire-risk home purchased in April was 2,000 square feet, while the typical low-risk home was just 1,706 square feet.
Despite the higher median sales price, sellers of high-fire-risk homes have become more likely than sellers of low-risk homes to slash cut their listing prices after putting the home of the market. In April, 21.9% of high-risk homes had a price drop, while 18.8% of low-risk homes had a price drop. April was only the second month on record (the first being March), in which fire-prone homes were more likely to have price drops.
However, across the country, price drops are on the rise, as mortgage rates have risen to some of their highest levels in the past decade.
In addition to higher prices, homes with high fire-risk are also selling faster than low-risk homes, with the typical high-risk home sold in 16 days in April compared to 20 days for a typical low-risk home. Prior to the pandemic, low-risk homes typically sold faster. In addition, 62.4% of high-fire-risk homes sold within two weeks in April compared to 55.1% of low-risk homes.
