May 31, 2023

The US real estate market is underestimating flood risk, says “Big Short” investor (CNBC)

Risk | by ClimateCheck | 1 Minutes

The United States real estate market is failing to properly account for flood risk — and that could lead to home value losses in the hundreds of billions, a prominent investor told CNBC.

“Our base case correction scenario leads to home value losses of about $800 billion in aggregate terms — so a pretty meaningful hit even to a $40 trillion market,” said DeltaTerra Capital CEO Dave Burt, whose accurate prediction of the 2008 housing bubble was featured in Michael Lewis’s book The Big Short.

A recent study cited by CNBC estimates US properties exposed to flood risk are currently overvalued by anywhere from $121 to $237 billion.

Extreme flooding is one of several weather events made more frequent and severe by climate change. Properties also face physical climate risk from drought, fire, extreme precipitation and extreme heat. Markets are already responding to risk: Home insurance premiums are up in places that face higher likelihood of climate-driven disaster; in California, State Farm is not accepting new applications for home insurance citing wildfire risk and other factors.

Access to better information can lead to better outcomes. Property owners and buyers can use online resources to identify risk of flood and other hazards. Those in areas of high flood risk can take additional steps to adapt to risk.

“These steps can include flood barriers, installing non return valves into drainage pipes, water resilient paints, and raised electrical sockets,” said CNBC reporter Sam Meredith.

Burt called for “elevated awareness.”

“People shouldn't feel complacent, just because their insurance prices haven't gone up at the time yet. And they have to realize that, even if you're in a safe place that doesn't have this exposure directly, all of these systems are tied together,” he said.

Watch the full 10-minute report to hear additional insights from Fathom Chief Research Officer Oliver Wing, University of Bristol Professor Paul Bates Paul Bates, and LV= General Insurance Head of Home Underwriting Sarah Smith.

Learn about risk of flood and other climate-driven hazards at

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