Do the high real estate prices in New York and New Jersey equal high danger?
The area has certainly seen its share of intense weather in recent years. But while the Tri-State area won’t likely be considered as a backdrop for the next earthquake blockbuster to hit the big screen, a recently released report from RealtyTrac reveals that a significant number of local neighborhoods are likely targets for harsh weather.
The 2015 U.S. Natural Disaster Risk Report found that 35.8 million U.S. single family homes and condos with a combined estimated market value of $6.6 trillion are in counties with high, or very high, natural hazard risk.
Those 35.8 million homes represent 43 percent of the 83.4 million single family homes and condos in all counties analyzed for the report.
For the report, RealtyTrac assigned a natural disaster risk score to 2,318 counties nationwide with sufficient home value data available. Based on its score, each county was assigned to one of five risk categories for overall risk of natural disaster: Very High, High, Moderate, Low and Very Low.
New York and New Jersey ranked in the less favorable categories on multiple occasions.
“In the interest of personal safety and protecting the value of what is likely their biggest financial asset, prospective buyers and investors should be aware of any natural disaster risk impacting a potential home purchase,” said Daren Blomquist, vice president at RealtyTrac.
“There is no reason homebuyers need to be surprised with natural disaster risk information when wading through a stack of disclosures at the closing table given the widespread availability of this data online and even through mobile apps.
“In most cases learning about natural disaster risk will not stop a home sale, but it will help buyers make a better-informed decision about where to buy, and also be prepared, in terms of appropriate insurance coverage and family contingency plans, depending on the type of natural disaster risks most affecting the home they end up purchasing,” Blomquist added.
Blomquist’s optimism regarding home sales is backed up by the fact that home values in high-risk disaster areas throughout the country are stronger than those in regions where the threat of storms, floods, etc. is less daunting.
Homes in Very High risk counties for overall natural disaster risk had an average estimated market value of $170,237, and homes in High risk counties had an average estimated market value of $191,244, according to the report.
Meanwhile the average home value in Very Low risk counties was $151,793, and the average home value in Low risk counties was $154,464.
Home price appreciation over the past three years has been stronger in higher risk counties for natural disaster. In counties with a High risk for overall natural disaster, home prices increased 16.6 percent.
“We did this report last year and it’s a similar pattern with these areas, in part because of the natural beauty that comes with the higher natural disaster risk and, in part, because a lot of these high risk areas become more highly desirable for buyers,” Blomquist told Brokers Weekly.
Any real estate professional in the New York Metro area can attest to the strength of the market despite the likelihood of a hurricane or other such catastrophe. However the risk is still a consideration.
Both New York and New Jersey were tagged in a group of states with the most homes in the High Risk or Very High risk categories with New York holding 2.4 million and New Jersey contributing 2.3 million.
Other states with significant numbers in both categories include California (8.4 million), Florida (6.7 million), and North Carolina (2.3 million).
In terms of metro areas with the highest risk, New York City took home the most precarious ranking and registered 3.5 million homes in High risk or Very High risk zones.
The next runner up was Los Angeles with 2.5 million.
“Our agents must be articulate in explaining the higher risks to buyers,” Mark Hughes said. Hughes is a chief operating officer with First Team Real Estate and covers the at-risk Southern California market.
“People have to be able trust their agent to fully disclose the risks of natural disasters and homeownership to allow buyers to make the most informed decisions.
“A well-informed, knowledgeable buyer is best prepared to take on the potential risks.”
The also report found that 24.5 million single family homes and condos — 29 percent of the 83.4 million total — with a combined estimated market value of $4.7 trillion, are in counties with a High risk or Very High risk for hurricanes.
In the wake of storms like Sandy, New York and New Jersey provide a significant amount of those homes.
Just under two million homes in each of the two states are susceptible to notable damage from hurricane-level storms.
While the state of Florida’s nearly seven million homes is significantly higher, the Greater New York City area provides the highest volume for a metro territory with three million.
A side effect that often accompanies hurricanes is flooding. So it’s not surprising that New York and New Jersey, two coastal states with highly populated banks along the Hudson River, fit this bill.
Both states hold nearly a million residential properties between them that are at risk for flood damage.