A new report by risk-modelling firm First Street has revealed that climate-related disasters are rapidly emerging as a critical threat to the US housing market, with the potential to cause over $1.2 billion in mortgage-related credit losses in 2025 alone and up to $5.4 billion annually by 2035.
The findings come as the Midwest reels from the deadly tornadoes that struck Missouri and Kentucky, killing at least 25 people and further exposing the vulnerabilities of American communities to intensifying climate extremes. Rising global temperatures are fueling more frequent and destructive weather events, leading to mounting insurance losses, higher premiums, and significant property value depreciation.
According to First Street, nearly 19,000 properties could be foreclosed this year due to climate risks such as flooding, wildfires, and hurricanes. That number could climb to over 84,000 annual repossessions within a decade. These projections underscore a growing financial strain on both homeowners and lenders, as many properties lack adequate insurance particularly against floods, which are often not covered by standard homeowners policies and are only required in limited federal zones.
In 2024, the US suffered at least $182.7 billion in weather-related damages, with global insurance losses reaching $320 billion. In high-risk areas like California and Florida, some private insurers have either hiked rates dramatically, ceased underwriting, or declined policy renewals altogether. These changes have triggered a ripple effect, pushing mortgage and credit card delinquencies higher.
The First Street report emphasized that while insurance coverage for wind and wildfire damage can buffer against default risk, the gap in flood insurance leaves many households financially exposed. As property values fall and recovery costs rise, borrowers face compounded risks that may undermine creditworthiness and threaten broader financial stability.
In total, these growing climate-driven financial pressures are reshaping the US housing and credit markets, introducing new systemic risks that call for urgent adaptation in lending practices, insurance frameworks, and federal disaster resilience policies.
Precautions to Reduce Risk of Home Repossession from Climate Disasters:
1. Secure Comprehensive Insurance: Ensure homeowners have adequate coverage for floods, windstorms, wildfires, and other region-specific risks. Consider purchasing flood insurance even if not federally required.
2. Understand Local Risk Zones: Use tools such as FEMA flood maps or climate risk platforms to identify whether your property lies in a high-risk area.
3. Retrofit Homes for Resilience: Invest in structural improvements like elevated foundations, fire-resistant roofing, storm shutters, and sump pumps to reduce damage from extreme weather.
4. Monitor and Review Mortgage Terms: Understand how rising insurance premiums and property value changes can affect mortgage obligations and loan servicing conditions.
5. Maintain Emergency Savings: Set aside funds for temporary relocation, deductible payments, or insurance gaps in the aftermath of a disaster.
6. Advocate for Stronger Policies: Engage with local representatives to support improved zoning, building codes, and disaster preparedness infrastructure in vulnerable communities.
7. Participate in Community Resilience Plans: Join local emergency planning and neighborhood climate adaptation initiatives that could bring federal funding and technical support.
With climate risks mounting, both individual precautions and systemic policy reforms are essential to protect homes, stabilize the mortgage market, and secure long-term financial health.