Many believe climate change will affect economies and societies across the planet, and there are already signs that concerns are working their way into certain real estate prices.
Recently published research in the journal The Review of Regional Studies revealed that dwellings facing the highest risk of flooding from a rise in sea levels sell for a discount relative to risk-free properties.
Authors Jason Beck and Meimei Lin analyzed sales of 42,000 single-family homes in Savannah, Georgia, for the period covering 2007 to 2016. Using data from the National Oceanic and Atmospheric Administration, the authors categorized vulnerability to inundation for each dwelling. The flooding risk was deemed the highest for properties expected to be inundated with a one-foot rise in sea level. The lowest risk was assigned to properties only likely to flood for a six-foot increase in sea level.
For Savannah, properties susceptible to flooding for an increase in sea level of three feet or less sold at a 3.1 per cent discount relative to dwellings deemed not at risk. Houses exposed to flooding for a rise in sea-level between three and six feet, however, did not report a discount relative to the risk-free properties.
When the authors divided the study into two distinct periods, they observed that the discount due to climate change was higher for the more recent period. This suggest that with the passage of time, risk awareness increased, and the effect of potential flooding risk grew over time.
The results come with one puzzle. Waterfront properties in many coastal regions across the globe continue to sell for a premium. If the risk of flooding posed by climate change is real, do property values reflect such risks?
A soon-to-be-published paper in the journal Review of Financial Studies offers some clues to the problem. Markus Baldauf of the University of British Columbia and others analyzed millions of residential transactions in the United States to determine the impact of future flooding vulnerability on transaction prices.
They also controlled for climate-change related beliefs at the local level by categorizing counties as “believers” and “deniers” using beliefs data from Yale Program on climate change. The Yale Climate Survey posed the question: Do you think that global warming is happening?
The answer was tabulated as the share of respondents in a county who answered yes. The authors characterized counties as “believers” if the share of those who answered yes was greater than the median value for the overall response. The “denier” counties were those who responded yes were less than the overall median response.
The authors quite interestingly found that “homes located in climate change ‘denier’ neighbourhoods sell for about seven per cent more than homes in ‘believer’ neighbourhoods.” Using the median priced house as an example, the authors demonstrated that if such a house was “relocated” from a denier county to a believer county, its value would decrease by approximately $26,220, which accounted for 13.8 per cent of the median price of $190,000.
It is not evident from the paper if the believers were overreacting to climate change risks or the deniers were in denial, the difference in valuation, though, was found to be statistically significant.
Research on housing in Helsinki, Finland, showed that when flood risks were disclosed to residents in the form of high-resolution flood maps, a statistically significant price drop was observed for coastal properties with greater probability of flooding.
The Finnish study, published in the Journal of Real Estate Finance and Economics in 2016, showed that in addition to the price drop, some demand for housing shifted from coastal dwellings with an elevated risk of flooding to places with similar coastal amenities, but a lower risk of flooding.
The review of research presented above allows us to draw some conclusions. Waterfront properties in coastal regions continue to be in high demand and sell at a premium. Coastal properties, though, can be categorized based on flooding risk due to global warming or other factors.
Empirical research has demonstrated that properties less or unlikely to be flooded in the future sell at a premium. However, as the flooding risk elevates, coastal properties experience a discount in property values.
Still, a drop in values is more pronounced in areas inhabited by those who believe in climate change. In counties where climate change deniers are in majority, the expected drop in valuation is lower.
Thus, the answer to the question of whether global warming affects housing prices depends at least in part on who you’re asking.
Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.
Grand County real estate transactions, Nov. 28-Dec. 4 – Sky-Hi News
Grand County’s real estate transactions Nov. 28-Dec. 4 were worth more than $21.9 million combined.
• Valquero Subdivision Lot 2, Access Easement/Drainage Easement – Byersview Inc to Triton DG Granby LLC, DGGrand LLC, As Investments LLC, $2,050,000
• 448 Condominiums Unit 303 and Garage Unit 1 – Virga Corporation to Timothy Smith, $634,496
• Wells Minor Subdivision Lot MH-1A – Colton and Jeffrey Powley to Colorado Mountain Resorts Investors LLC, $381,741
• Fairways at Pole Creek PH 1 & Open Space Lot 4 23 – Linda and Donivan Ridgway Jr to Melissa and Joe Penn Jr, $2,480,000
• Eggert Subdivision Lot 5, Block 1 – Marjorie and Robert Noakes to Matthew Herron and Heidi Keyes, $412,250
• Fraser Crossing-Founders Pointe Condominium Unit 4470 – Copernicus LLC to Winter Park Drive 4470 LLC, $480,000
• 448 Condominiums Unit 101 and Garage Unit 5 – Virga Corporation to Jeffrey Vose, $725,944
• Roam Filing 1, Lot 18, Block 5 – Ski Idlewild Property LLC to Hunt Vac Services LLC, $950,000
• Zephyr Mountain Lodge Condo Bldg 1 & 2, Unit 2605 – Scott and Kimberly Balfanz to Scott and Anne Steputis, $850,000
• Zephyr Mountain Lodge Condo Bldg 1 & 2, Unit 2401 – Erik Amy LLC to Jeffrey McDonald, $579,000
• SEC 6 TWP 1N R 76W Partial Legal – See Document – Ellen Pacheco to Samuel and Monika Conger, $600,000
• Ptarmigan Subdivision Fraser Lot 102, Block MH – Fiona Russell to Derek Jotzat, $725,000
• Inn at SilverCreek PH 1, Condo Unit 322 – Glenda Sinardi and Parker Clonts to Charles and Lea Maxwell, $225,000
• Frontier Investment Company Addition to Kremmling Block 6, Lots 1,2,3 – Lodema Reinier, Lodema Cullum to Kelsy and Devin Ailport, $479,000
• Heinis Addition to Kremmling Block 1, Lots 5,7 – Benjamin and Kellie Steinle to Kristina Costa, $440,000
• Base Camp 9200 Second Replat Unit B2 – Sandhills Capital LLC to David and Marla Schmidt, $395,000
• Granby West Business Park Block 1, Lots 1,2 – Granby Industrial LTD Liability Co. to Elk Mountain Adventure Properties LLC, $300,000
• Mildred June Weaner Outright Exemption Lot J – Monarch Cabin LLC to Jerry Johnson, $430,000
• Rangeview Subdivision #2, Lot 33 – Randall Claeys and Stephanie Conners to Colin and Krystal Steward, $90,000
• Lake Forest 1st Addn Subdivision Lots 42,43,48,49; Laurent OE Lots A,B – Serge Laurent to Margaret J Blakley Revocable Trust, $800,000
• Meadow Ridge Lodges Court 7, Unit 9 – Eric Stanczak Jr to Rachael Watton, $580,000
• Muddy Creek Minor Subdivision TRT D – Muddy Creek Partners LLC to Areceli and Hugo Gonzalez, $325,000
• Bussey Hills Subdivision Block 7, Lots 7,14 – Michael Blasi and Arthur Aguilar to Heather and Michael Rinaldi Jr, $45,000
• Grand Lake Block 10, Lots 1,2,3 – GLL Real Estate LTD to McCarthy 401K Plan Trust, $1,150,000
• Rendezvous Center Condominiums Lot 3 – Rendezvous VC LLC, Koelbel Company to Brandon Kunz and Keith Jensen, $1,719,000
• Fraser Crossing-Founders Pointe Condominium Unit 3523 – FC 3523 LLC to Geoffrey and Rachel Nuwash, $485,000
• Crestview Place Condominiums Unit 604H – Debra and Robert Reehoorn to Beryl Foster and Robert Henry, $731,400
• East Mountain Filing 11, Lot 25 – Rendezvous Colorado LLC to Duncan, Peter and Suzanne Griffiths, Rochelle Rabeler, $1,465,904
• East Mountain Filing 10, Lot 138 – Rendezvous Homes LLC to Bawcom Living Trust, $1,424,366
Treasury wants more oversight of all-cash real estate deals – North Bay Business Journal
WASHINGTON (AP) — The Biden administration is looking to expand reporting requirements on all-cash real estate deals to help crack down on bad actors’ use of the U.S. market to launder money made through illicit activity.
The Treasury Department was posting notice Monday seeking public comment for a potential regulation that would address what it says is a vulnerability in the real estate market.
Currently, title insurance companies in just 12 metropolitan areas are required to file reports identifying people who make all-cash purchases of residential real estate through shell companies if the transaction exceeds $300,000.
“Increasing transparency in the real estate sector will curb the ability of corrupt officials and criminals to launder the proceeds of their ill-gotten gains through the U.S. real estate market,” said Himamauli Das, acting director of Treasury’s Financial Crimes Enforcement Network.
Das said the move could “strengthen U.S. national security and help protect the integrity of the U.S. financial system.”
The metropolitan areas currently facing reporting requirements are Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle.
The U.S. real estate market has long been viewed as a stable way station for corrupt government officials around the globe and other illicit actors looking to launder proceeds from criminal activity.
The use of shell companies by current and former world leaders, and those close to them, to purchase real estate and other assets in the U.S. and elsewhere was recently spotlighted by the International Consortium of Investigative Journalists’ publication of the “Pandora Papers.”
The leaked documents acquired by the consortium showed King Abdullah II of Jordan, former U.K. prime minister Tony Blair and other prominent figures used shell companies to purchase mansions, exclusive beachfront property, yachts and other assets for the past quarter-century.
The tax dodges can be legal but have spawned various proposals to enhance tax transparency and reinforce the fight against tax evasion.
The effort to push for new real estate market regulation comes as the Biden administration on Monday issued its “U.S. Strategy on Countering Corruption.”
The strategy was published as President Joe Biden prepares to host the first White House Democracy Summit, a virtual gathering of leaders and civil society experts from more than 100 countries that is set to take place Thursday and Friday.
The strategy offers broad brushstrokes for confronting corruption at home and abroad. It includes calls for the U.S. government to shore up regulatory gaps, elevating anti-corruption in U.S. diplomatic efforts and bolstering the protection of civil society and members of the media, including investigative journalists, who expose corruption.
Real estate, home renovations boom during pandemic – St. Albert Today
The real estate and home renovation markets have been booming since COVID-19 came and kept everyone in their home, industry experts have said.
Doris Wyatt, realtor with Re/Max Elite and Robertson Real Estate, said the last two years have been “exceptional” in the real estate market.
“The last two years, 2020 and 2021, have been very active, busy years. Inventory levels are certainly down in St. Albert as well,” Wyatt said.
Buyers are flocking to the market because of the historically low interest rates, Wyatt said. First-time buyers are entering the market with lower payments and families are up-sizing their homes and taking advantage of the low rates.
“You’ve got a bit more buying power,” Wyatt said.
St. Albert has faced a low supply of housing, Wyatt said, with new communities such as Erin Ridge North and Jensen Lakes still in the build-out phase. As low interest rates cause high demand for housing, the result is higher prices and less selection for buyers.
In St. Albert 1,100 single-family homes have been sold in 2021, year-to-date, with an average selling price of $485,100, Wyatt said. In all of 2020, there were 834 single-family homes sold in St. Albert, with an average price of $462,179.
“This equates to an approximate increase of five per cent in the average cost of a single-family home in St. Albert,” Wyatt said.
Right now, inventory levels for single-family homes is low, with only 106 active single-family homes available, down from 169 at this time last year.
And while condos aren’t as hot as single-family homes, they are still selling in the city.
So far in 2021 there have been 296 condos sold with an average selling price of $282,000, Wyatt said. In all of 2020 there were 221 condos sold in St. Albert with an average selling price of $253,598.
Currently there are 92 available condos for sale in St. Albert and last year at this time there were 110 for sale.
In St. Albert anything in the $450,000 to $500,000 range goes very quickly, but even homes in the higher price ranges are selling fast.
When the pandemic hit, many people who were renting felt like it was time to move into home ownership, and those who already owned were spending so much time at home many looked to move into a bigger space.
While working from the kitchen table or basement seemed like a temporary change from the pandemic, nearly two years in, some employees are realizing they may be working from home for much longer and are looking to get a comfortable office or more space to work.
Demand is so high Wyatt said multiple offers are fairly common.
“If a house is in good condition and priced according to the market, we often see multiple offers happening,” Wyatt said.
Tara Borle, lead mortgage broker with Mortgage Architects, said many buyers are taking advantage of the low interest rates.
“The rates were at historical lows, which I think helped steam everyone buying these houses,” Borle said.
“They’ve climbed up a little bit over the last few months. They’re still really good, but I think the historical rates helped with people wanting to get in. We were giving out 1.59 [per cent] for a five-year lock-in rate at one point,” Borle said.
Those who already own homes, Borle said, are trying to take advantage and switch their higher rates down to the lower rates, which is keeping mortgage brokers busy.
Around 60 per cent of those who come into Borle’s office want to buy a new home, she said, and the remaining 40 per cent want a new rate on the mortgage of the house they already own.
On the other side, Borle said some people who have really struggled with COVID-19 financially are coming in to refinance their homes or find money to pay off credit cards.
“That’s the other side that we’re seeing, too, and that’s a sad side,” Borle said.
While the real estate market has been hot, home renovations have been booming, too.
Doug Walton, from Nest Builder, said business has increased since COVID-19, and the company has doubled the number of renovations in the community.
Walton said any contractor right now is likely booked from mid to late 2022 with such high demand for renovations.
People are spending more time at home during COVID-19 and they are feeling like they need extra space in their homes for their offices, Walton said.
“They have the extra money because they haven’t been traveling, and they want to put it into their home because that’s where they’re spending majority of their time. So that’s driven a lot of the renovation increase,” Walton said.
COVID-19 has caused financial woes for many and Walton said many are still being budget conscious when they renovate their homes.
Instead of buying a new home, many are choosing to renovate their older homes instead, because they have bigger backyards and larger properties.
Supply chain is a big challenge renovators are currently facing. What used to take six to eight weeks is now taking 12 to 18 weeks, Walton said.
“We just plan accordingly and we don’t start jobs until all materials have arrived,” Walton said.
Overall it has been a good year for builders, Walton said.
“It’s been a good year for us and we continue to work at trying to fit everybody in and keep everybody happy.”
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