Zillow's new tool claims to show the climate risk of homes

To those of us in South Florida, it’s no secret that natural disasters are happening more frequently and are stronger, our preparedness has become more important than ever.

It’s why there’s new data that’s hoping to change how we choose where to live and how our homes are built.

So far 2024 has seen 18 named storms, 11 of them were hurricanes and 5 were Category 3 or higher.

The devastation in Florida was widespread.

“In recent years what we have seen is an increase in impacts, many of the scientists believe are associated with climate change,” says Renato Molina, assistant professor at the University of Miami’s Rosenstiel School, specializing in environmental and research economics.

While he and other experts agree that climate change has always been considered when making financial decisions, there’s never been a good way to account for all of the details that may impact a certain area.

“How a given neighborhood is affected by a flooding event is not just a function of the overall geography of the neighborhood, or the intensity of the storm, it also has a lot to do with the things in place in that specific neighborhood, or the house itself, or the actions that the family might take to protect the house against potential flooding events,” explained Molina.

But now, there may be a way to measure climate change’s impact.

Zillow unveiled their new climate risk data, provided by New York-based First Street, that uses computer models to estimate the risks that climate change and weather events have on real estate.

With Zillow’s new system, when you look up an address or area, it gives you five categories of risks you should consider.

Extreme heat, air quality, wind damage, flooding and wildfire.

Each risk is color coded, and has its own scale to tell you just how serious that risk is in the area you are looking at.

“These risk scores are a great way to understand where and what neighborhoods, which particular homes especially when we talk about flooding and storm surge, will be more likely to be impacted. But it goes beyond that too, by providing insurance recommendations let’s say above and beyond what might be required to get that mortgage, because of potentially rising risks. Because you might have to consider not just insurance costs today, but also into the future,” said Skylar Olsen, Chief Economist at Zillow.

“Climate risks are a rising concern for buyers in Zillow’s master customer survey we do once a year. In this most recent year, 4 out of 5 buyers said that they consider climate risk when considering where to shop for a home, what home, what area, at some point in their shopping journey,” said Olsen.

THE CATCH

But the scores are not necessarily the most reliable, according to real estate experts like Eli Beracha.

“Nothing against Zillow specifically, but there are multiple ways to measure climate risk. The truth is nobody knows what the true risk is,” said Beracha.

"How close it is, and how significant it is, and how real it is, and how close it is in the next 5 to 10 years or whenever. So, putting a number there, even though it provides information, there’s a lot of uncertainty surrounding how reliable that number really is.”

Multiple investigations have also led to skepticism about these scores.

Last year, a report from a team of White House Scientific Advisors said these models were of ‘questionable quality’.

An investigation from Bloomberg found that different climate risk models create stark contrast estimates for the same property.

Molina explains why that might be.

“Many of them rely on factors that are very big, at a big scale, like the geography of a city, where it is, how it is expected to be impacted by sea level rise, but also they rely on other things that are at lower scales.”

“Such as the project of the Army Corps of Engineers being implemented here, what is the expected area that’s going to be protected from that project? And then things on a smaller scale, has a canal been dug out here, is it operational? Was it renovated? And whether that is being considered will lead to different results.”

So, while it’s admittedly not perfect, Molina says it’s still a good tool.

LET'S TAKE A LOOK

When we zoom into our coverage area, an area like Miami, for the most part experiences a half of a foot or less of flood risk, except for areas on the coastline or the Everglades.

When we look up an area like Fort Lauderdale, it’s about the same, with even less flood risk on the coastline.

Heat risk is the same for all of the southeastern portions of the state.

And Molina says the air pollution scores are very accurate.

“Air pollution is basically driven by large factors like the wind, where it’s going, where the air pollution is being emitted and so on and so forth,” said Molina.

Olsen says it's difficult to determine how these weather risks and climate change may impact the real estate market long term.

“One, the impacts will a come over time. Two, they will come more when we experience it monthly like through that insurance payment. And because of the livability of this space, because of the unique lifestyle, it could continue to demand premiums for quite some time. It’s just how the market will continue to absorb and start to understand the costs of some of these spots,” explained Olsen.

THE INSURANCE COMPANIES

But Dr. Beracha doesn’t believe these scores will drive insurance companies to increase their prices.

“I think insurance companies are more sophisticated than just taking Zillow’s score at face value. So, insurance companies will continue to have their own assessment of what the risk is.”

“At the end of the day, the insurance and market prices of insurance premiums, they will determine how risky your house is, because at the end of the day if you can insure against that risk, and you can measure it with dollars, then that is the amount of risk you can or cannot take. If you cannot insure against those rates, then there really is a problem.”

Molina also believes while these tools are a good benchmark, Floridians tend to be very informed about the costs of living in paradise.

“People are sophisticated, but as they become more aware of what these risks mean for them and their day to day living, they might be able to make different tradeoffs, and at some point they might not be willing to engage in such a risk and they will retreat, properties more exposed will suffer less prices. But as of now, and specifically for Miami, the market is pretty clear, people are still willing to trade off that risk for living in a nice area.”

Dr. Beracha says if you are curious about flood risk in your area, the more accurate picture may be by checking your area’s flood zone.

Molina explained that to create the best model possible you would need access to all the information which is almost impossible to do.