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Perspectives Blog

Consumers Worried about Impact of Extreme Weather on Homes and Insurance Premiums

April 3, 2024
Kevin Tillmann
Kevin Tillmann

Market Research Senior Associate, National Housing Survey

Saiful Amin
Saif Amin

Senior Director – Climate Impact Strategy

Research conducted by Fannie Mae's Economic & Strategic Research (ESR) Group indicates that nearly half of consumers are concerned about the impact of weather-related events on their homes, and two-thirds report that such weather has impacted their insurance premiums. Recently, the ESR Group leveraged its National Housing Survey to survey homeowners and renters on their experiences with and concerns regarding a broad range of weather-related events, including extreme heat, strong winds (from hurricanes and tornadoes), drought, wildfires, and flooding. The survey asked consumers which weather-related events concern them, whether they think potential damage from such events will impact their insurance premiums, and where they're likeliest to turn for reliable information on these topics.

Among our key findings:

  • Nearly half of respondents expressed concern about the impact of extreme weather events on their homes, but they're especially concerned about excessive wind and heat. As expected, geographic location has a significant influence on the weather-related events that are of greatest concern to consumers: Strong winds are the biggest concern in the Northeast, Midwest, and South, while extreme heat is the biggest concern in the West. Additionally, a quarter of respondents reported having experienced weather-related damage to their current home.
  • Two-in-three insured homeowners said weather-related events and damage have had an impact on their home insurance premiums. Additionally, two-thirds of homeowners have taken precautionary measures to reduce damage risk to their home.
  • Consumers trust a mix of sources to determine the risk of weather-related damage to their homes. Their preferred "source of truth" includes insurance agents (40%), the Federal Emergency Management Agency (or FEMA, 35%), and friends and family (32%).

Weather Concerns Are Geographically Driven
Among the nearly half of consumers who are concerned about weather-related events, consumers nationwide are most concerned (either "extremely" or "somewhat") about extreme heat (24%) and strong winds from tornadoes and hurricanes (23%). Respondents reported lesser levels of concern with drought (15%), wildfires (13%) and flooding (12%).

Regional concerns over weather-related events

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A regional view provides even greater nuance. In the West, drought (24%) and wildfires (22%) are of significantly higher concern, while strong winds (35%) are of more concern in the South.

Notably, concerns among homeowners about the resulting expenses (46%) of extreme weather-related damage lagged behind other, potentially more familiar aspects of owning a home, including the cost of routine maintenance (70%), property tax increases (64%), economic inflation impacting affordability (60%), and concern over job loss (49%). The results were similar among renters.

Insurance Premiums Also Impacted by Weather-Related Events
Two-thirds of homeowners reported that weather-related damage has had at least some impact on their insurance premiums. One in four reported a "large" impact on insurance premiums.

Of the insured homeowner population, nearly one in ten were not confident that they'd be able to afford their insurance premiums at the next renewal date. Digging a little deeper, more Black (14%), Hispanic (13%), and Asian (15%) insured homeowners expressed concerns about affording their premiums at renewal than White homeowners (8%).

Additionally, two-thirds of homeowners reported taking precautionary measures to minimize the risk of future damage to their home. One-third took steps to prevent wind damage; one-quarter (27%) acted to prevent water damage from sewer and drain backups; and another 24% have taken steps to address flooding.

Weather-related damage and insurance premiums, trusted sources

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Whom Consumers Trust for Information about Damage Risk
Consumers did not report a single, dominant "source of truth" for reliable information regarding weather-related damage risk. Consumers indicated that they're most likely to trust their insurance agent (40%), FEMA (35%), and friends and family (32%). Far fewer consumers reported trusting information from a realtor (13%) or mortgage lender (9%).

When considering the single source they trust the most, approximately one in five consumers reported their insurance agent (20%) or FEMA (18%), followed by friends and family (11%).

The Implications of Climate on Affordability
In 2023, the U.S. was struck by a historic number of billion-dollar-plus weather- and climate-related disasters, according to the National Oceanic and Atmospheric Administration. These disasters impact housing costs, and significant work remains to be done to raise awareness on the topic, particularly in relation to the affordability challenges facing homeowners and renters.

This latest research builds on our recently published flood risk and insurance study by considering multiple weather-related events across a broader set of consumers and geographies. At Fannie Mae, we strive to share actionable, reliable information with the housing industry and the public at large, including on how climate-related issues may be affecting not only consumer behavior but also their perceptions of housing and housing risk. We believe highlighting these sorts of issues, like the affordability of insurance and the assorted precautionary measures consumers can take to minimize damage and protect their homes, are key to ensuring housing stability.

Opinions, analyses, estimates, forecasts and other views reflected in this commentary should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Changes in the assumptions or the information underlying these views could produce materially different results.