Smart Money in Real Estate

I've posted before about sea level rise.  Here there is more evidence about the melting of Greenland's glaciers.  Real Estate prices in Florida are already showing the reaction to sea levels.

Scientists are exploring changes underway in the Greenland Ice Sheet as a result of global warming. Algae, dust and soot, a short-lived climate pollutant also known as black carbon, are exacerbating melting.

Satellite images have confirmed that the Greenland ice sheet ... holds 23 feet of sea level rise.

From Climate Central:

Global average sea level is expected to rise by one foot between 2000 and 2050 and by several more feet by the end of the century under a high-pollution scenario because of the effects of climate change, according to the projections in the new peer-reviewed study. It shows 21st century sea-level rise could be kept to less than two feet if greenhouse gas emissions are aggressively and immediately reduced, reflecting a larger gap in sea-level consequences between high and low emissions scenarios than previous research has indicated.

 And this is what is going to happen

The trillion-dollar coastal property bubble is ready to burst, per new study.   Rising seas hit U.S. coastal property values: "A pricing signal from climate change."

We are now seeing “a pricing signal from climate change” in the relatively depressed prices for the coastal property most at risk for flooding, as Harvard real-estate professor Jesse Keenan told the Wall Street Journal Friday.

Keenan is the lead author of a new study of Miami single-family homes that found the “rates of price appreciation in the lowest elevation” homes “have not kept up with the rates of appreciation of higher elevation” homes since about 2000 (see chart). That is, the homes along Miami’s coast most at risk from climate change are seeing their value drop over time compared to homes less at risk of flooding.

A second, broader study, “Disaster on the Horizon: The Price Effect of Sea Level Rise,” found that “Homes exposed to sea level” are being priced 7 percent lower than homes that are the same distance from the beach, but that are less exposed to flooding.

The study, which used Zillow data from around the country, concluded that the pricing gap between riskier homes and safer homes was being driven by the “more sophisticated investors.” For that group, the gap is about “11 percent and has increased over time, coinciding with the release of new scientific evidence on the extent and timing of ocean encroachment.

The trillion-dollar coastal property bubble is ready to burst

The economic risks from rising seas are enormous — but the Trump administration’s policies all but guarantee a worst-case scenario plays out.
A 2014 Reuters analysis of this “slow-motion disaster” calculated there’s almost $1.25 trillion in coastal property whose value is being propped up by the National Flood Insurance Program’s below-market rates.

[....]

Sean Becketti, the chief economist for mortgage giant Freddie Mac, warned in 2016 that the coastal property bubble will burst sooner than expected: “Some residents will cash out early and suffer minimal losses. Others will not be so lucky.”

As Bloomberg put it last April, “Demand and financing could collapse before the sea consumes a single house.” The studies discussed above make clear that process may already be starting.

Here’s the ultimate question for owners of coastal property, and the financial institutions that back them: Who will be part of the smart money that gets out early – and who will be with the other kind of money?

Smart here means not denying global warming.  People who deny global warming and own coastal property are going to be separated from their money.