Climate Change and the Coming Real Estate Calamity
Last year, I was shocked to learn that insurance for my home, about 20 miles north of Santa Fe, was not going to be renewed. It took weeks to find another carrier. While I knew that insurance companies were starting to pull out of areas in California which had experienced multiple wildfires in recent years, I didn’t expect this would impact me in my location near Pojoaque Pueblo, far from the fire-prone Sangre De Christo foothills.
Yet my experience is far from unique. New Mexico has the sixth highest wildfire risk in the nation, with 115,800 homes in peril, and that risk is increasingly reflected in the cost and availability of our insurance. Home insurance rates in NM rose 24% from 2021 to 2023.[1] Worryingly, 13% of properties in NM are already uninsured, the second highest rate in the US after Mississippi. Moreover that percentage is likely to keep going up–insurance companies failed to renew more than 10,000 policies between 2021 and 2024.[2]
This trend bodes ill for the US financial system. Most people‘s largest investment is their primary residence, with housing accounting for roughly 30% of household wealth, 23% of the US bond market, and 18% of GDP.[3] The housing-based economy is now under serious threat as climate change makes millions of homes uninsurable, unfinanceable, and puts them at risk of destruction.
Global temperature rise is causing a rapid increase in extreme weather. Earlier this year, 18,000 homes in Los Angeles burned to the ground.[4] In 2024, Hurricane Helene caused $78 billion of damage in North Carolina alone,[5] affecting over 100,000 homes.[6] Thousands of properties in Florida, Georgia, South Carolina, Tennessee, and West Virginia were also ravaged.
Since the 2010s, home insurers have disbursed more in claims than they have collected in premiums.[7] In response they are raising premiums by up to 50% in some areas and withdrawing or reducing coverage in other areas previously considered to be lower risk such as Utah, Arizona, and Iowa. In a growing number of US cities, home insurance is simply unavailable[8] and non-renewal rates are rising nationwide.
For those homeowners with insurance, the extra financial burden of more expensive premiums combined with higher interest rates may increase their risk of default. Homeowners without insurance may find themselves in violation of the terms of their mortgages, leading to penalties or the recall of their mortgage and loss of their home.
The effect of natural disasters on home prices will be profound, but tragically, our government is in denial.
Forty percent of the US population live on the coasts, making them vulnerable to sea level rise.[9] Private banks that issue mortgages are charging approximately 0.75% higher interest rate spreads on mortgages for properties exposed to greater sea level rise risk.[10]
Unfortunately, federal entities are not required to take risks like fire or flooding into account when underwriting loans, which means the federal mortgage system is underpricing climate risk. Banks take advantage of this by selling risky loans to Fannie Mae and Freddie Mac,[11] shifting the burden of potential losses onto public entities, and ultimately onto the shoulders of tax payers.
Last year, the Congressional Budget Office found that properties with federally backed mortgages were likely to sustain about $190 billion in flood damage over the coming 30 years.[12] It warned that nonrenewals and premium increases could lead to a nationwide collapse in property prices.[13]
The effect on the banking system of widespread defaults caused by climate could dwarf the subprime mortgage crisis of 2008.
But instead of working proactively to mitigate and adapt to these looming threats, the federal government is sticking its head in the sand.
At the United Nations General Assembly in September, President Trump dismissed climate change as “the greatest con job” in the world. He has promised to withdraw the US from the Paris Climate Accord. He has increased subsidies to the fossil fuel industry while clawing back environmental protections and killing funding for renewable energy projects, electric vehicles, and federal climate research. If our planet can be compared to a burning ship, Trump is adding fuel to the fire while at the same time jettisoning the life boats.
Sustainable investors are not blind to this jeopardy. We work to quantify climate risks and to avoid the most vulnerable investments. It is high time for the government and investors more broadly to start paying attention.
This material is intended for education purposes only. LongView Asset Management, LLC (referred to as "LongView") does not warrant that the provided information will be free from error. None of the information provided is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon for transacting securities or other investments. Under no circumstances shall LongView be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials provided. In no event shall LongView Asset Management, LLC have any liability to you for damages, losses, and causes of action for accessing this commentary. Past performance is not indicative of future results. This content not reviewed by FINRA. Photo by Troy Olson on Unsplash.
[1]https://www.santafenewmexican.com/news/local_news/climate-change-to-blame-as-insurance-companies-drop-santa-fe-homeowners/article_f114f6ee-bf91-11ee-83a9-8fa25dbb3e14.html
[2]https://sourcenm.com/2025/07/28/heinrich-co-sponsors-bill-to-study-wildfire-impacts-on-home-insurance/
[3]https://www.federalreserve.gov/econres/scf/dataviz/scf/chart/#series:Primary_Residence;demographic:all;population:1;units:medianchrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www2.census.gov/library/publications/2025/demo/p70br-211.pdf; https://www.nahb.org/News-and-Economics/Housing-Economics/Housings-Economic-Impact/Housings-Contribution-to-Gross-Domestic-Product
[4] The Growing Void in the U.S. Homeowners Insurance Market (npj Climate Action, 2025)
[5] https://www.wral.com/weather/hurricane-helene-damage-western-nc-one-year-later-september-2025/
[6]https://wlos.com/news/local/200000-people-impacted-by-helene-housing-damages-many-struggling-to-find-homes-western-north-carolina-buncombe-county-david-bailey-fema-donations
[7] https://en.wikipedia.org/wiki/Home_insurance
[8] https://www.christiancentury.org/editors/climate-catastrophe-here
[9] https://coast.noaa.gov/states/fast-facts/economics-and-demographics.html
[10] https://academic.oup.com/rof/article-abstract/26/6/1509/6542327?login=false
[11]https://www.nytimes.com/2024/12/07/business/economy/mortgages-climate-risk-fannie-freddie.html?searchResultPosition=1
[12]https://www.nytimes.com/2024/12/07/business/economy/mortgages-climate-risk-fannie-freddie.html?searchResultPosition=1
[13]chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.budget.senate.gov/imo/media/doc/next_to_fall_the_climate-driven_insurance_crisis_is_here__and_getting_worse.pdf