Climate change is coming for Florida’s real estate. Why don’t prices reflect it?

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As a University of Miami doctoral student studying climate change, Mayra Cruz knew more than most about the risks of sea rise and wetter storms and hurricanes. So when she and her husband bought their first home in 2021, they picked inland Miami Springs and bought federal flood insurance. They felt good, learning the only previous claim had come long ago, after Hurricane Andrew. Then three storms in three years sloshed 18 inches of water into their backyard. And when the city posted a warning about flooding on Instagram, it used pictures of her impassable street. Last summer, the couple decided to sell because of the repeated flooding. They wrote a “crystal clear” disclosure: the home escaped damage, but water got unnervingly close. Cruz worried if anyone would buy it. “My Realtor said it would still sell. I asked ‘Are you sure?’ I wouldn’t buy this house knowing what I know.”

They got an offer almost immediately, selling for nearly $250,000 more than they paid for it.
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[quote] It’s a paradox of South Florida’s super-heated real estate market: When homeowners like Cruz move out because of growing flood risks, somebody else always seems willing to move in — and often at a much higher price. “Our housing value almost doubled in that time,” Cruz said. “That’s absolutely insane. Our house should not have been worth that much.” The value of her home and thousands of others in Florida have been buoyed at least in part by what some experts call a climate denial bubble. A wave of reports in the last five years has pegged the size of the bubble in the billions and suggested a correction is looming, potentially a major one. It has yet to come.

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In 2020, the consulting firm McKinsey predicted coastal home values could drop by as much as 15 percent by 2030 as flood risks from sea rise, hurricanes and more intense thunderstorms are factored in. Another paper the same year found that Miami-Dade County was the most overvalued county in the nation — about $3.5 billion higher than it should be because of flood risks. One recent report estimated that real estate statewide was overvalued by $50 billion based on flood risks alone.

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One veteran analyst agreed to chart home sales for the Herald in four South Florida neighborhoods that experienced extreme flooding events in the last decade. She found property values increased after every disaster – sometimes dramatically. They even continued rising in a Key Largo neighborhood that remained flooded for 90 straight days. So, despite dire warnings from environmentalists and some economists, the South Florida real estate industry looks at the numbers and doesn’t see evidence of a bubble ready to burst. Rafael Corrales, a senior Redfin agent in Miami, acknowledges hearing more questions about flooding but says it’s not a deal-breaker for most buyers. Yet. “It’s all fun and games until it’s not,’’ Corrales said, “and that’s what we’re all bracing for, God forbid, as residents of South Florida.”

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In the Stillwright Point neighborhood in Key Largo in the Florida Keys, residents endured 90 days straight of flooded streets in October 2019, with water levels pushed up by hurricanes and unusually high tides. It was so deep that police couldn’t patrol, and delivery drivers couldn’t reach homes. The saga became a national news story.

In the months following, plenty of residents put homes up for sale. Despite the publicity and the flooding problem, year-over-year sales rose by 40%, and so did the median sale price — by $20,000. Six years later, the roads have yet to be fixed, although a project is in the works. Now, the median sales price for a single-family home in that neighborhood is almost $200,000 higher.

In Miami’s Little Havana, where another rainstorm swamped homes and apartments in June 2022, the same story played out. Bozovic found the median price for homes sold in the floodprone neighborhood rose $20,000 the following year, to $655,000.

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