Realtors that stay educated on real estate trends, including the impact of climate change on the building market, will generate business and stay a step ahead of their competitors. Increasing temperatures, rising sea levels, and more frequent and intense storms due to climate change will significantly impact the real estate market.

Realtors must consider climate risk to their properties in order to lessen long-term financial risk.

If you are selecting new properties for your portfolio, Fox Blocks recommends choosing and marketing sustainable, energy-efficient, and wind-, flood-, and fire-resistant assets built to withstand these events. Ideally, selecting properties built with high-performing products, like Fox Blocks insulated concrete forms (ICF), will improve your investment performance, lower your insurance rates, and contribute towards a sustainable and safe environment for future generations.

What is Causing Climate Change?

The scientific community attributes more than 95 percent of the current warming trends to the industrial revolution and the mass production of fossil fuels. Burning fossil fuels generates carbon dioxide. The excessive carbon dioxide stays in the atmosphere, creating a cover that traps the Sun’s heat energy in the Earth’s atmosphere, warming the planet and oceans. In addition, the industrial revolution led to the mass cuttings of carbon-absorbing forests to create farmland.

Consequences of Global Warming on the Real Estate Market

Increasing temperatures due to global warming significantly impact our atmosphere, oceans, ice, and ecosystem, causing more frequent and severe weather events, higher sea levels, and other detrimental impacts - all of which affect the real estate market.

Warming environmental temperatures cause more frequent and severe weather disasters, like floods, storms, heatwaves, and droughts. As of October 2021, the U.S. experienced 18 weather/climate disaster events, resulting in property and infrastructure damage of $104.8 billion and growing, exceeding the damage toll in 2020 of $100.2 billion. The disasters included one drought, two floods, nine severe storms, four tropical cyclones, one wildfire, and one winter storm. Between 1980 and 2020, the U.S. annually-averaged only 7.1 extreme weather events.

As the average temperature in the Arctic rises, the world’s ice sheets melt faster, leading to rising sea levels of one to four feet by 2100. The high sea levels threaten our coastal systems and low-lying areas, including some of the world’s largest cities, including Los Angeles, Miami, New York, Sydney, Mumbai, and more. By 2045, rising sea levels threatened $135 billion in commercial and residential real estate nationwide.

In addition, higher death rates and dirtier air can be attributed to climate change.

Real Estate Industry’s Environmental, Social, and Governance Criteria

The consequences of changing weather patterns mandates that realtors and developers include climate risk as a vital consideration to their financial success.

In 2006, the real estate industry adapted three Environmental, Social, and Governance (ESG) criteria to help investment properties foster eco-friendly practices and measures. A Harvard study found that realtors and developers that focus on these three areas will significantly improve their financial success. ESG data helps a realtor attract more capital, reduce long-term financial risk, gravitate toward higher-quality assets, and improve investment performance:

• Environmental: Evaluate a property’s energy consumption, carbon emission, and waste.

• Social: Determine how the property fosters community between the tenants, staff, and local community, to promote social responsibility and well-being.

• Governance: Ensure ethical practices to run building operations compliant with federal, state, and local laws. In addition, transparency in financial or policy changes.

The Benefit from Energy-Efficient and Sustainable Real Estate

To remain competitive, realtors should educate themselves on the short and long-term financial benefits of investing in sustainable real estate as we adapt to climate change. The Appraisals Institute recognizes sustainability and energy efficient homes, and MLS identifies energy efficient homes and recognizes HERS and Energy Star ratings.

Sustainable Real Estate Will Attract Buyers

Corporations, institutions, and governments increasingly demand sustainable construction to maximize our infrastructure efficiency, resilience, health, and sustainability. Moreover, the National Association of Realtors found that 65 percent of agents and brokers find energy efficiency promotion in listings valuable to their marketing.

Improves Rents and Vacancy Rates

Sustainable buildings allow for up to ten percent more rents and lower vacancy rates than non-sustainable buildings. Notably, three in four millennials will pay more for sustainable products and solutions.

Improves Long-Term Property Values

Freddie Mac's research found that high-efficient homes sell for 2.7 percent more on average than less efficient homes.

Buyers Want Lower Long-Term Costs

The National Association of Home Builders (NAHB) reports that home buyers want energy efficiency above all other features for their houses, including ENERGY STAR rating for the whole house, durable materials, solar design, efficient lighting, and ENERGY STAR-rated windows and appliances. According to the U.S. Department of Energy, energy-efficient features save the average family 30 percent on energy bills.

Moreover, the average home buyer will pay up to $9,292 more upfront, for a house that can save $1,000 annually on utility costs. Buyers will also pay $2,000 upfront for a home that is certified to above-code health and wellness standards, which is increasingly important in the wake of COVID-19.

Quickens Sales

In Portland, Oregon, a study found that green-certified homes sold 18 days faster than comparable non-certified homes

How the Real Estate Business Can Prepare for Climate Change

The real estate industry’s role in sustainability, including climate change mitigation and energy efficiency, provides a substantial growth opportunity for up-to-date realtors.

As building owners’ and investors’ awareness of climate change increases, the demand for green building design, materials, and practices will increase, providing a significant opportunity for realtors and developers. Fox Blocks offer the following recommendation to realtors and developers to adapt their businesses to climate change.

Factor in Flooding Risks

Floods in the U.S. cause more damage than any other weather event, costing $5 billion a year, damaging and destroying homes, businesses, manufacturers, and public buildings — anything in the flood’s path. Moreover, the more frequent and devastating flash, river, urban, and coastal flooding due to warming temperatures, poor urban planning, and deforestation put an estimated 14.6 million properties in the country at risk of a 100-year flood.

Since properties at flood risk may become less valuable due to climate change, investors, realtors, and developers must factor flood risk into their current value projections.

Consider Soaring Insurance Rates

Gradual climate risks, like sea-level rising, weather patterns, and drought/heat stress, can damage properties over time, leading to higher operating and maintenance costs. In addition, less disaster-resistant properties will suffer more damage and require extensive repairs after the increasing number of hurricanes, wildfires, and earthquakes due to climate change.

Traditionally, the real estate industry relied on insurance to cover climate risks. However, as climate events increase in high-risk areas, you must anticipate reduced insurance availability and soaring premiums when adding properties to your portfolio.

Focus on Sustainable Real Estate Properties

Diversifying your real estate portfolio with the addition of Fox Blocks ICF commercial buildings and houses will help limit climate risks to your assets, and protect against increasing floods, hurricanes, tornados, and wildfires. These features will help manage, if not lower, insurance costs. In addition, energy-efficient ICF structures will attract buyers, quicken sales, and improve the resale values of your assets.

Quick and easy to install, flood-resistant Fox Blocks ICFs solid continuous monolithic concrete walls provide moisture resistance (perm below 1.0), by ensuring that moisture within a wall framing system will dry out and not move to nearby building components. In addition, Fox Blocks reinforced concrete construction won't degrade when wet, and will maintain its original shape and integrity during and after a flood.

Wind-resistant Fox Blocks ICF stands up to winds of over 200 mph and projectile debris flying over 100 mph, providing more protection against extreme wind events than steel and wood framing.

Fire-resistant Fox Blocks ICFs offer 6-inch blocks with an ASTM E119 fire rating of four hours (twice the two-hour requirement), and ASTM E84 reported values for flame speed of less than 25 and smoke development of less than 450.

Energy-efficient Fox Blocks ICF structures create tight building envelopes, stopping air and moisture inflation, combating higher energy costs due to increasing temperature.

Case Study of How ICF Construction Protects Against Hurricanes

Hurricane Harvey hit the Texas coast in 2017, bringing intense 130 mph winds and severe flooding (up to 60.58 inches of water), destroying or damaging 135,000 homes; however, ICF homes survived the devastation.

A Roadmap for Realtor Education: Adapting for Climate Change

Successful real estate professionals must stay informed of changes in the real estate industry due to climate change. Climate change can significantly threaten to diminish, if not destroy, the value of homes and buildings with the increasing floods, tornados, hurricanes, and wildfire that will damage if not destroy their value. In addition, increasing temperatures demand more energy-efficient construction.

Therefore, when evaluating properties to add to your portfolios, it is imperative to consider climate risk, energy efficiency and insurance costs. Choosing structures built with sustainable products, like Fox Blocks ICFs, can significantly protect your businesses' stability against climate change.

Don’t hesitate to contact Fox Blocks professionals today to see how realtors and developers can adapt to climate change.