Lets talk a second about sea level rise with climate change and how many homes ($800 Billion worth) are literally going to be under water by the turn of the century.
I remember reading an article a year or two ago about a town in North Carolina where politics deep-sixed a study that showed that all of their homes would be under water by the end of the century. After they killed the report, all future studies were limited to only 30 years. So for now, their real estate is A-Ok.
But, if you think about it, there are two organizations that don’t care about real estate holdings in the same way : insurance companies and banks. They can’t doubt science, they need to account for it and their risk analysis departments need to consider flooding in coastal areas. And the insurance industry seem to be taking flooding very seriously, you can easily see that it’s almost impossible to get flood insurance now. How much longer do you think it will take for the banks to stop giving 30 year mortgages?
And it will only take one or two banks to start this process. Once the idea gets out that financing these properties over long periods of time is too risky all the other banks will most likely follow along because banks are very risk averse.
As more and more banks decline to loan for beachfront properties over long periods it’s going to be a very quick domino effect and soon nobody will do it. And then real estate that at one point was valued in the millions immediately goes to almost 0 as nobody can get a loan to buy it.
But even if this doesn’t happen as I’m imagining it, how long do you think it will take people who own coastal property to lose confidence in the coming market and sell before its too late? All it will take is one nice storm and some serious flooding. Or one report from someone saying that flooding is inevitable. And then the bottom of the market is going to drop. And it will drop fast and far.
When will the tipping point occur?