A new analysis warns that climate change could significantly disrupt the U.S. housing market, triggering a sharp rise in foreclosures and billions in losses for lenders over the next decade. The study, conducted by research firm First Street, highlights the escalating financial toll of extreme weather events such as flooding, hurricanes, and windstorms.
According to the findings, climate-driven foreclosures could increase by 380% in the next ten years, with weather-related events accounting for up to 30% of all U.S. foreclosures by 2035—up from just 7% today. Low- and moderate-income homeowners are especially at risk, as they are more likely to lack the resources needed to recover from property damage and rising insurance costs.
Much of Americans’ personal wealth is tied to homeownership. As storms become more frequent and severe, many homeowners face skyrocketing insurance premiums or limited access to coverage, particularly in high-risk areas. These added financial pressures make it more likely for struggling households to fall behind on mortgage payments.
The financial fallout is expected to extend beyond homeowners. Lenders could face losses of \$1.2 billion in 2025 and as much as \$5.4 billion annually by 2035 due to defaults tied to climate-related damage. The report argues that these represent “hidden risks” often overlooked in traditional mortgage underwriting, which generally focuses on income and creditworthiness but not property exposure to climate threats.
The study also found that even modest increases in insurance premiums could drive up foreclosure rates. For every 1% rise in insurance costs, there is a corresponding 1% increase in foreclosures nationwide.
Florida is expected to be hit especially hard, with Duval County alone projected to suffer \$60 million in credit losses during a severe weather year. Louisiana, California, and parts of the Northeast also face high risk, along with inland regions vulnerable to flooding.
Experts suggest that integrating climate risk into mortgage lending could help prepare both banks and borrowers, though it may also make it harder for many Americans to buy homes.
Source: First Street