Creeping flood waters driven by sea rise have yet to reach the doors of most homes in Miami-Dade, but research shows the looming threat from climate change is already affecting their value. And not in a good way.
New data from Harvard University and the University of Colorado suggests that homes in lower elevations are selling for less and gaining value slower than similar ones at higher elevations. Researchers see that as sign that some buyers are factoring climate risks into their offers and investments — a trend that could have major implications for a state with more coastal real estate at risk than any other.
Miami's real estate professionals, however, are skeptical of the climate ripple effect, pointing out the continued soaring prices of expensive waterfront in places like Miami Beach and Key Biscayne. They say their buyers are more concerned with nearby schools and taxes than whether their property will be underwater in 50 or 100 years.
“I’m not hearing it. My associates aren’t hearing it. My realtors aren’t hearing it. It’s not a huge, deep concern from the public,” said Coral Gables realtor Christopher Zoller. “Yeah people talk about it, but has it prevented them from making a purchase? No.”
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And yet, Jesse Keenan, a professor with Harvard's Graduate School of Design, said his recently published paper is the first dollars-and-cents indicator that climate change is already having an impact on the real estate market.
His team reviewed sales of more than 100,000 homes in Miami-Dade County from 1971 to 2017 and found that the lower elevation houses gained value slower than higher elevation homes. That gap grew even wider after 2000, which Keenan said is when sunny day flooding became more frequent in South Florida.
“It really stood out that low elevation properties essentially serve now as inferior investments,” he said. “I think it’s pretty clear. It may or may not be climate change, but it’s hard to argue it’s not climate change.”
A broader study from the University of Colorado at Boulder found that the effect isn't contained to South Florida.
Assistant professor Ryan Lewis and his team reviewed nearly 500,000 houses and condominium sales across the nation from 2007 to 2016 and found that homes vulnerable to sea level rise sell for an average price 7 percent lower than similar homes safe from rising seas.
That disparity jumped all the way to 19 percent for properties that would be underwater with a foot of sea rise. About 2,500 people in Miami-Dade County live on land less than a foot above sea level, according to data from Climate Central, and a unified projection from the Southeast Florida Climate Compact predicts the region will see around one to two feet of sea level rise by 2060.
Lewis said his data show that the loss of value, which he called a discount, will probably worsen in the future as more home buyers learn about their vulnerability to sea level rise. The more home buyers know about their risk, the more likely they are to negotiate a better discount for their property. The research shows investors — who buy multiple houses — pay less for homes than buyers who live in the home.
That could, he said, lead to a "wealth shock" for the buyers who pay too much. A home is the largest financial investment for a majority of Americans, who usually rely on the home to grow in value over the years so it can be sold for retirement funds at the end of mortgage in 30 years.
“Suddenly this asset is worthless precisely when they need it the most,” Lewis said.
Miami's real estate industry pushes back hard against such scenarios. Zoller, former chair of the Miami Association of Realtors, said members aren't hearing much concern from customers.
“I think the consumer has yet to get panicked about it.,'' he said. "They’re not there yet.”
Moreover, the most expensive places — the ritzy waterfront mansions — may be more insulated than others from the ripple effects of climate risk, at least for now. Zoller said sea level rise risk hasn't slowed home sales in expensive, low-elevation areas like Gables Estates.
Both studies backed up Zoller's observation. The changes in value aren't visible in hot real estate markets.
“It doesn’t affect the rich very much," Keenan said.
His research, in fact, singled out Key Biscayne and Miami Beach as two areas where lower elevation properties closer to the water were more valuable than higher areas on the same island.
Alicia Cervera, a luxury home broker who works in Miami Beach, said the idea that prices are changing because of sea level rise is "fake news." She pointed to new data showing that the median price of a single family home in Miami has gone up every month for six years straight.
“I have not talked to one buyer — not one — who said ‘I’m not buying in Miami because of sea level rise,' ” she said. “It’s a simple ebb and flow of the real estate market, not the ocean."