From Oct. 12, 2020 to Jan. 3, 2021, Redfin ran an experiment on 17.5 million of its users across the US. As prospective homebuyers entered the site, Redfin assigned them randomly to either a group that was shown flood-risk information on each property or a group that was not.
The flood-risk scores came from First Street Foundation, a climate and technology nonprofit that works to make climate hazards more transparent to the public. In June 2020, First Street published the first public maps that revealed flood risk for every home and property in the contiguous US.
First Street scores properties on a scale of 1 to 10 based on the likelihood that they will flood in the next 30 years (which is assumed to be a typical mortgage term). A score of 1 means the property has "minimal" risk and a score between 9-10 is considered "extreme" risk.
From Oct. 12, 2020 to Jan. 3, 2021, Redfin ran an experiment on 17.5 million of its users across the US. As prospective homebuyers entered the site, Redfin assigned them randomly to either a group that was shown flood-risk information on each property or a group that was not.
The flood-risk scores came from First Street Foundation, a climate and technology nonprofit that works to make climate hazards more transparent to the public. In June 2020, First Street published the first public maps that revealed flood risk for every home and property in the contiguous US.
First Street scores properties on a scale of 1 to 10 based on the likelihood that they will flood in the next 30 years (which is assumed to be a typical mortgage term). A score of 1 means the property has "minimal" risk and a score between 9-10 is considered "extreme" risk.
So what happens once you start showing people flood-risk information? They, not surprisingly, start systematically looking for safer properties. After one week of users being exposed to this new information, prospective buyers who were previously looking at "extreme" homes started looking at homes that were about 7% safer.
After 9 weeks, these same "extreme" home buyers were looking at properties that were about 25% less risky. And for some buyers, in particular those working with a Redfin agent or partner, their flood-risk tolerance dropped by over 50%. (Embedded in this data might be a sales pitch for working with a knowledgeable Redfin agent or partner).
Also interesting is the fact that below "severe" flood risk (a score between 7-8), there was very little change in behavior. "Major" flood risk, it would seem, isn't all that concerning to most buyers. It needs to be "severe". Nevertheless, it is noteworthy that people will in fact make behavioral changes when presented with clear climate-risk data.
Here is a chart from MetroSight that compares housing tenure in California in 2000 and then between 2015-2019:
Two things you might notice immediately are that the number of renter-occupied households has generally increased and that the number of owner-occupied households without a mortgage (i.e. they own their home free and clear) has also increased for every age category except for those 65 or older.
If you've been following the Toronto housing market and/or following any panicky resale agents/brokers on Twitter, you'll know that things have shifted over the last few months. Here's what broker (and my friend) Christopher Bibby had to say about the market in his most recent newsletter:
As anticipated, April has ended up being one of the defining months of the 2022 real estate market. With the recent fragility we are seeing, it is clear that the market peaked in February. In fact, the Toronto Real Estate Board, in its most recent Market Watch, claims that month-over-month prices could be down by 2.6%—which is very likely. TREB also indicated that the overall number of year-over-year transactions in March was down by approximately 30%. I deferred the release of this newsletter because weekend activity positively altered some of my previous commentary. The key takeaway, however, is that sentiment has shifted in our marketplace.
But let me paraphrase the conclusion of Bibby's newsletter with two words: who cares? If you think that Toronto (or some other city) will remain an important global city by 2025, 2030, or even 2040, you really shouldn't be fussed by what the market is doing over the span of a few months.
Moreover, I can tell you that my least favorite time to go out and buy real estate is when everyone else is submitting silly offers and clamoring to buy whatever they can find.
So what happens once you start showing people flood-risk information? They, not surprisingly, start systematically looking for safer properties. After one week of users being exposed to this new information, prospective buyers who were previously looking at "extreme" homes started looking at homes that were about 7% safer.
After 9 weeks, these same "extreme" home buyers were looking at properties that were about 25% less risky. And for some buyers, in particular those working with a Redfin agent or partner, their flood-risk tolerance dropped by over 50%. (Embedded in this data might be a sales pitch for working with a knowledgeable Redfin agent or partner).
Also interesting is the fact that below "severe" flood risk (a score between 7-8), there was very little change in behavior. "Major" flood risk, it would seem, isn't all that concerning to most buyers. It needs to be "severe". Nevertheless, it is noteworthy that people will in fact make behavioral changes when presented with clear climate-risk data.
Here is a chart from MetroSight that compares housing tenure in California in 2000 and then between 2015-2019:
Two things you might notice immediately are that the number of renter-occupied households has generally increased and that the number of owner-occupied households without a mortgage (i.e. they own their home free and clear) has also increased for every age category except for those 65 or older.
If you've been following the Toronto housing market and/or following any panicky resale agents/brokers on Twitter, you'll know that things have shifted over the last few months. Here's what broker (and my friend) Christopher Bibby had to say about the market in his most recent newsletter:
As anticipated, April has ended up being one of the defining months of the 2022 real estate market. With the recent fragility we are seeing, it is clear that the market peaked in February. In fact, the Toronto Real Estate Board, in its most recent Market Watch, claims that month-over-month prices could be down by 2.6%—which is very likely. TREB also indicated that the overall number of year-over-year transactions in March was down by approximately 30%. I deferred the release of this newsletter because weekend activity positively altered some of my previous commentary. The key takeaway, however, is that sentiment has shifted in our marketplace.
But let me paraphrase the conclusion of Bibby's newsletter with two words: who cares? If you think that Toronto (or some other city) will remain an important global city by 2025, 2030, or even 2040, you really shouldn't be fussed by what the market is doing over the span of a few months.
Moreover, I can tell you that my least favorite time to go out and buy real estate is when everyone else is submitting silly offers and clamoring to buy whatever they can find.
MetroSight uses this data to argue that a new "wealth-related phenomenon is emerging" in California. Instead of the housing market being largely driven by income (that is, I make this much per year and I can afford this much house), it is being driven by accumulated wealth.
The possible explanations for this are as follows:
The share of renter-occupied households is increasing because people increasingly can't afford to buy
The share of owner-occupied houses with a mortgage is decreasing because less people can afford to buy given California's price-to-income ratios
The share of owner-occupied houses without a mortgage is increasing because people are increasingly inheriting homes or getting gifted cash from their families
Consider that the share of owner-occupied houses without a mortgage even increased for the 18-24 age category. Unless you're the next Zuckerberg (who was a billionaire at age 23), this is pretty challenging to do without some kind of assistance, especially in a place like California.
This outcome also provides a possible explanation for why the over 65 age category is the only segment that has seen a reduction in free and clear ownership. It is because they are transferring their wealth to the next generation so that they too can obtain homeownership.
MetroSight uses this data to argue that a new "wealth-related phenomenon is emerging" in California. Instead of the housing market being largely driven by income (that is, I make this much per year and I can afford this much house), it is being driven by accumulated wealth.
The possible explanations for this are as follows:
The share of renter-occupied households is increasing because people increasingly can't afford to buy
The share of owner-occupied houses with a mortgage is decreasing because less people can afford to buy given California's price-to-income ratios
The share of owner-occupied houses without a mortgage is increasing because people are increasingly inheriting homes or getting gifted cash from their families
Consider that the share of owner-occupied houses without a mortgage even increased for the 18-24 age category. Unless you're the next Zuckerberg (who was a billionaire at age 23), this is pretty challenging to do without some kind of assistance, especially in a place like California.
This outcome also provides a possible explanation for why the over 65 age category is the only segment that has seen a reduction in free and clear ownership. It is because they are transferring their wealth to the next generation so that they too can obtain homeownership.
