How Natural Disasters Impact the Housing Market

In this aerial view taken from a helicopter, burned homes are seen from above during the Palisades fire near the Pacific Palisades neighborhood of Los Angeles, California on Jan. 9, 2025. JOSH EDELSON / AFP via Getty Images

In recent years, natural disasters have hammered wide swaths of the United States. Hurricanes, wildfires, floods, and other catastrophes have caused death and destruction and forced millions of people to flee their homes.

In the long term, those disasters have impacted the housing market and exacerbated housing shortages, insurance costs and rents.

Many attribute headline-making calamities to climate change. Other factors include the migration of population to high risk areas such as those prone to flooding and fire. Whatever the cause, the frequency and severity of natural disasters has worsened, in many cases dramatically.

The disruption caused by hurricanes, droughts, winds, and wildfires takes both an emotional and a financial toll on individuals and families.

The initial impact is often followed by a precipitous drop in home prices, as would-be buyers are scared off. In just one example, when Hurricane Irma struck in 2017, Florida home sales dropped 50 percent.

Market confidence is shaken immediately after a disaster, and it takes time for the market to return to stabilization. However, some “bottom-feeding” investors can always be expected to troll the area of damaged homes to see if they can pick up a property cheaply.

Many homebuyers now take into serious consideration the risk of natural disasters when choosing where to buy a home.

Let’s examine some of the more impactful results on the housing market following these oftentimes unpredictable and untimely disasters.

Housing Impacts

When disaster strikes, forcing people out of their homes, displaced residents are suddenly part of the overall housing demand picture. They’re going to be shopping locations and homes to replace what they lost.

That factor in itself will result in increased overall home prices.

Moreover, in areas impacted by a disaster, the investment in rebuilding homes and infrastructure will affect overall home prices over time. In Fort Myers, following the devastation caused by Hurricane Charley (2024), home prices increased by a third just a year later.

In Los Angeles, fires have destroyed or damaged well over 12,000 structures, including 6,000 homes. The destruction has devastated a locale that already had a severe housing shortage before the fires swept through.

The worsening shortage of homes will have a two-fold impact in terms of higher home prices and higher rents as displaced people look for shelter. Despite anti-price gouging laws, there have already been reports of rent increases from 50 to 70 percent.

In many cases, Los Angeles residents will simply relocate to other metro areas to avoid the effect of the housing shortage on home prices. Popular destinations include Las Vegas and Phoenix, among other areas.

Given both factors—displaced residents suddenly looking for homes, offset somewhat by mass migration to safer and cheaper locations—the overall complexion of housing can change radically after a major disaster.

Insurance Costs

Higher insurance premiums and deductibles affect affordability and homeownership rates in disaster-prone areas. At the same time, the threat of experiencing a disaster without the benefit of insurance fuels a strong demand for policies to protect against losses.

On a national level, the average home insurance premium went up 6 percent in 2024, reaching about $2,522 by the end of the year. California, Florida, Texas, and Louisiana—considered disaster-prone states—are suffering the highest increases.

California saw some insurance companies hike rates by as much as 34 percent in 2024 due to wildfires. Likewise, Florida is experiencing sharp rate hikes.

Worse, in high-risk areas, policy non-renewals and cancellations are increasing, making it harder for homeowners to maintain their coverage.

California’s Department of Insurance recently passed regulations that allow rate increases to enable homeowners to buy higher coverage in disaster-prone areas. Other states are also adapting to this trend.

Due to a recent rule change, California’s approximately 9 million homeowners may all feel the pain of recent wildfires, in the form of a potential assessment to be levied by California FAIR, the state’s insurer of last resort for canceled homeowners.

It’s a challenging situation for many homeowners, but shopping around for better rates, taking advantage of discounts, and making home improvements to reduce risk can help manage costs.

Emotional Toll

The emotional toll of natural disasters can be profound and varied for both individuals and communities.

The sudden and often unexpected nature of natural disasters can lead to an immediate sense of shock and acute stress. People may mourn the loss of homes and possessions, often with deep sentimental value attached.

More than just a passing stressful event, this loss of a home can cause grief that is intense, long-lasting, and harmful to one’s well-being.

Anxiety about the future, fear of more and deadlier disasters, and a shattered sense of security can be debilitating. Mental and physical health may suffer.

That’s when a sense of grief sharing, community, helping others who suffered the disaster, and getting professional counseling are crucial.

Without help, people can feel hopeless and fall into depression due to being emotionally overwhelmed and alone. Reaching out for help—in itself a way of taking control of the situation—and staying determined to remain positive can lead to a stronger sense of community and purpose.

Circling back to the housing market, in addition to cost and safety, there’s another reason why people migrate after a disaster. Moving from an area fraught with bad memories is an attempt to psychologically distance themselves from the tragedy.

Whether you stay and rebuild or move and put down new roots, it’s important to address the lingering effects of what you’ve experienced. Reach out for help.

Now What?

Mental health professionals, community resources, and social support networks are available to deal with both concrete needs and emotional healing. Where can you turn?

The Federal Emergency Management Agency (FEMA) offers programs for disaster survivors. Some of these programs include case management, counseling, and financial help.

The American Red Cross provides emergency shelters. In addition, the Red Cross offers food and health care.

In Los Angeles, 211LA has partnered with Airbnb to offer free temporary shelter for disaster-displaced people.

Many local organizations such as the YMCA open their doors to provide temporary shelter, showers, and basic amenities.

Other organizations on an international, national, and local level—such as Global Giving, Project Hope, and the California Community Foundation—offer resources, including financial support.

Local governments offer specific programs and services. Check to see what’s available in your area.

After the Nightmare

After the unthinkable happens, recovery is a gradual process. In the immediate aftermath of a natural disaster—something more and more of us have experienced or will experience—your family’s health and safety matter most.

Here are a few guidelines for coping with the direct aftermath and beginning the recovery process.

• Check for injuries. Contact emergency services if necessary. Don’t try to move the seriously injured unless they are in immediate danger of further injury or death.
• Assist your neighbors, especially the elderly, disabled, and young children.
• Communicate: Let family and friends know you’re safe by phone, text, or social media.
• If authorities advise evacuation, follow the routes provided.
• Protect your own health. Don’t do too much at once. Wash hands frequently if working with debris, and wear protective gear to guard against health hazards.
• Check for structural damage, gas leaks, electrical issues, smoldering insulation, or other hazards. Look out for downed electrical wires, washed-out roads, contaminated water, and broken glass.
• Stay informed by listening to local authorities and emergency broadcasts for updates and instructions.
• Call your insurance, and take photos or videos of any damage, for insurance purposes. Keep good records of receipts for repairs or clean-up.
• Continue to monitor news for updates on relief efforts and recovery operations.

The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.