How Your Home's Flood Risk Hurts Your Wallet

How Your Home's Flood Risk Hurts Your Wallet recently announced they will now use data collected from First Street Foundation's Flood Factor to provide flood risk scores for every home — both for-sale and off-market — in the continental U.S. But how does flood risk affect the value of your current or future home?

If you’re a typical American homeowner, most of your wealth is tied up in your house. It’s probably the biggest investment you’ll ever make. In addition to being the castle that protects your family and possessions, it’s the piggy bank you might have to tap for college tuition, home repairs or medical emergencies. Protecting your home’s value is vital to protecting the financial security of your family.

Flooding is a major, yet-little recognized, threat to home values. Not only do flooded homes need expensive repairs, but many never recover their full value. When it comes time to sell a house with a history of flooding, or a home at risk of flooding, potential buyers will reduce their offer to reflect that risk. The first thing home inspectors look for are signs of flood damage.

Protecting property value is good for the housing market and the overall economy.

  • In 2018, residential investments and rent, utilities and other housing services made up almost 15 percent of the country’s gross domestic product (GDP).
  • Zillow reported that at the end of 2019, the combined value of every residential property in the United States was $33.6 trillion.
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But the nation faces a big national problem: 14.6 million properties in the lower 48 states are at substantial risk of flooding, according to a new study from First Street Foundation. In Florida, 1.8 million homes are at substantial risk.

Between 2005 and 2017, 18 coastal states from Maine to Texas lost almost $16 billion in real estate value due to flooding, First Street found. That’s the combined average annual income for 2.58 million households. Florida homeowners saw the greatest loss in home value, at $5.4 billion.


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Flooding affects everyone.

Flooding reduces property values in coastal communities, like Cape Coral, Florida. But it also affects inland neighborhoods. Flooding can occur virtually anywhere it rains. Heavy rainfall events can flood roads and overwhelm stormwater drains. They can cause rivers, creeks, canals and lakes to overflow their banks.

  • Homeowners who live near flooded properties or flooded roads face financial risk, even when their own homes aren’t affected.
  • For example, homes near roads affected by tidal flooding in Miami-Dade County lost about $3.70 per square foot of value every year between 2005 and 2016, First Street found.

Another problem is that flooding often shuts down roads, stranding drivers and homeowners, and forcing businesses to close. There’s a reason they call it “nuisance flooding.”

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Lower property values also mean less tax revenue, which jeopardizes funding for critical
services and investment in flood protection.

In Florida, real estate makes up 22 percent of the state’s $1 trillion GDP. Lower property values hurt the entire state’s economy.

Flooding is by far the most common disaster in America – more common than hurricanes, tornadoes, earthquakes, home fires or wild fires. Tens of millions of Americans who live outside flood zones don’t realize they still face a significant flooding risk. Understandably, they don’t spend much time thinking about the potentially catastrophic consequences of flooding.

For that reason, flood-damage experts recommend a thought exercise for homeowners:

Stand in the middle of your living room and visualize water up to your waist. Visualize the muddy water mixed with sewage. See yourself dragging all your belongings to the curb and then ripping out the drywall to prevent toxic mold from growing.

Ask yourself: How will I pay for the rebuild? Where will my family stay during the months it takes to rebuild? What if the local flood plan requires us to elevate our house before we rebuild?

Finally, ask yourself whether you’re truly safe from a flood even though you don’t live in a flood zone. What if something totally unforeseen happened, such as your neighborhood storm drains got clogged or overwhelmed during a heavy downpour, a nearby levee failed or nearby new construction suddenly redirected runoff down your street.

Remember: As a homeowner, flooding is the most likely disaster you face.