Hurricanes caused more than $1.1 trillion in damage and nearly 6,700 deaths in the U.S. between 1980 and 2021, according to the National Oceanic and Atmospheric Administration (NOAA), and the damage is getting worse. NOAA says five of the top 10 disaster years in U.S. history have occurred since 2011.
In 2022, there were 14 named Atlantic storms, including three that made landfall on the U.S. mainland, led by Hurricane Ian and its estimated $112.9 billion in damage, much of it in southwest Florida. This year's storm frequency is projected to be much the same.
With the rising intensity of these storms, weather nerds aren't the only people who need to follow these disturbances. This is especially important for people who own beachfront properties.
While research shows that the value of beach properties often rises after a storm -- probably due to reduced inventory meeting enduring demand -- real estate investors should consider the possible limits to that demand as the costs and risks continue to rise.
Image source: Getty Images.
Beach towns are a magnet for people -- and storms
Beach towns have been a magnet for permanent and part-time residents and investors for a long time. With hurricane season here, now's a good time for this not-so-trivial question: What state do you think dominates the list of dangerous (to your wallet) beach home markets? Texas? Florida?
Nope. The answer is New Jersey.
According to a study by Assurance, a home insurance comparison site, five of the 10 U.S. communities with the highest percentage of homes at risk of flooding are on the Jersey Shore, led by Wildwood at 22.27% and Atlantic City at 19%. The town atop the flooding risk list, at 33.12%, is Ocracoke, North Carolina, an isolated and lightly populated community on the Outer Banks.
By property value at risk, California dominates the list with nearly $2.6 billion in properties deemed vulnerable in Newport Beach alone. And looking forward, the Assurance report says Galveston, the Texas coastal city where a 1900 hurricane killed an estimated 8,000 people before an iconic seawall was built, is now deemed the city with the most property at risk based on projected overall sea level rise. It's expected to rise 1.9 feet there by 2040, nearly 60% more than the national average.
Assurance drew its data from NOAA, the Union of Concerned Scientists (UCS), and Zillow. Insurers are paying attention, too, and the effects have already been dramatic.
Insurers abandon ship while premiums soar
As the climate changes, home insurance costs in beach towns have skyrocketed in recent years. Earlier this month, AAA said it would cancel some of its policies in Florida, and Farmers Insurance announced it would leave the state, joining more than a dozen other insurers that have fled.
There are many others still in the market, of course, but news reports say these decisions will force at least 100,000 policyholders to find new coverage, usually at much higher rates. Investors renting their properties will have to raise their rates to compensate or pay more to live there themselves.
Tides are rising and so is flooding
It's not just storm surges and wind damage threatening these beach towns. Rising sea levels have led to more frequent tidal flooding in low-lying areas like Miami Beach, Florida, where researchers now say 99% of properties in the city have a 26% chance of being severely affected by flooding in the next 30 years.
While many things are out of a homeowner's control, beach property owners can take proactive measures, such as elevating properties, reinforcing foundations, and creating natural barriers to mitigate the effect of rising sea levels and high-tide flooding. But those are expensive measures, and lots of local governments closely regulate and even resist such activities.
Image source: Getty Images.
Wade in with eyes wide open
While owning a beach house can be a dream for many, it's important to be aware of the risks and take steps to protect the return on your investment. Almost everywhere along the East Coast is vulnerable to hurricanes and flooding risk.
While the lure of the sea will continue to attract people and their money to popular beach destinations, investors should study the data on their own and weigh costs and risks carefully before buying beachfront property. Wading in with eyes wide open will help mitigate surprises from storm damage, expensive repairs and maintenance, and insurance-rate hikes down the road.
