The impact of climate change on the housing market needs to be more carefully considered, according to Freddie Mac in its monthly Insight for April, which focused on flood challenges the industry could face.
Some impacts of climate change, such as rising sea levels, changing rainfall, flooding patterns, and rising temperatures, may not be covered under home owners’ insurance policies.
“If those homes become uninsurable and unmarketable, the values of the homes will plummet, perhaps to zero,” Freddie Mac researchers warn in the report. “In the housing crisis, a significant share of borrowers continued to make their mortgage payments even though the values of their homes were less than the balances of their mortgages. … Unlike recent experience, home owners will have no expectation that the values of their homes will ever recover. It is less likely that borrowers will continue to make mortgage payments if their homes are literally underwater.”