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As I continue to try to estimate the climate risk to my home, I read various articles about climate change to see how it’s impacting the world.  I came across this interesting article detailing an in-depth study forecasting the economic cost of climate change on the US.  The study was produced by the Climate Impact Lab, a consortium of researchers (check out their cool interactive map here!)

This study is attracting attention because it is trying to project the overall economic cost of climate change to the US on a county-level.

This reminded me of an important consideration for climate change and real estate – climate change can seriously impact the value of your house while never physically touching it.

Sometimes, I ask people their thoughts about real estate and climate change.  Basically, I want to gauge their awareness of climate change, thoughts, etc.

For the most part, people don’t think about it.  However, when they do talk about climate change, they usually focus on the physical risks.  They may say something like “It’s not my issue, I live in a condo kilometres from the waterfront” or “I don’t think my region will be impacted – geographically it’s far north and away from the coast.”

Maybe it won’t directly impact your house – your house may not flood or be burnt in a forest fire.  But what if it adversely impacts your local economy – that will certainly impact your house value.

So, what does this study say about the future impact of climate change in the US?

First, it projects that climate change will overall adversely impact the US economy, lowering the GDP by 1.2% per Celsius degree increase.

Second, the projected impact of climate change on the economy will be substantial and varied – ranging from a GDP increase of 13% increase to a GDP decrease of 28%.  This will also impact poorer counties more severely than richer counties.

Third, there is also a clear pattern in the potential impact of climate change on the GDP.  The further Southeast you go, the higher likelihood of negative economic impacts.  The study characterizes this as a potentially large transfer of value in the country.

This means that climate change will probably have a significant impact on the resale value of your home and your neighbourhood.  After all, if the your local economy declines by nearly 30%, it will have a negative impact on the market value of the your real estate.

These kind of projections could help predict the economic risks presented by climate change to your real estate (as well as your life) and help you determine where it is a good idea to own real estate in that area long-term.

There are some important caveats for this study when viewing projections.  These projections are based on a “business-as-usual” scenario.  Furthermore, they have only addressed risks that have adequate data and are quantified.  For instance, even though bio-diversity is considered important, the authors omitted this risk as they were not confident how to quantify the cost of loss of biodiversity.  This means the study’s projections are most likely over-optimistic as they omit important risks.

Still this will be a useful resource to track and plan for the future in real estate dealings.

Next: Is your Property’s Elevation Flood Resilient?

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