1.2 million homes face financial risks as climate change escalates

Homeowners across the United States are confronting a growing financial risk as climate‑related disasters turn property ownership into a potential trap. In the past year, more than 1.2 million families with mortgages in flood‑prone or wildfire‑exposed areas have seen their homes damaged or destroyed, while insurers have raised premiums by an average of 35 percent. The problem is most acute in the Gulf Coast, where rising sea levels and heavier storms have driven a surge in flood claims, and in the West, where a string of megafires has left entire neighborhoods uninhabitable.

The shift reflects a broader trend that began after the 2008 financial crisis, when lenders encouraged home buying as a path to wealth. Low‑interest rates and easy credit pushed millions into the market, inflating prices even in high‑risk zones. At the same time, climate change has intensified the frequency and severity of natural hazards, eroding the assumption that a house will always appreciate. Federal data shows that between 2010 and 2023, the number of homes built within a mile of the 100‑year floodplain grew by 22 percent, outpacing the national housing stock. As a result, many borrowers now face loans that exceed the post‑disaster value of their properties, leaving them underwater and unable to refinance or sell without a loss.

Lenders, insurers and policymakers are beginning to respond. Major banks are adding climate risk models to underwriting, and some are refusing new mortgages in the most vulnerable zip codes. The Federal Housing Finance Agency has announced a review of its flood‑insurance mapping to better align premiums with actual risk. Consumer advocates warn that without coordinated action, a wave of defaults could ripple through the mortgage market, forcing a shift toward renting and reshaping the American Dream of homeownership. The coming months will test whether the financial system can adapt to a climate‑impacted housing market before the next storm hits.