Real estate listings with flood scores shift home-shopper habits

Let's say you want to sell your home in Cape Coral, Fla., and think you'll get a great price because of the proximity to water. Or perhaps you're thinking of buying a starter home in a newly built-up neighborhood in Houston.

Did the property's risk of flooding in the next 30 years cross your mind as you considered the home's curb appeal? Probably not, but maybe it should have.

Potential home buyers who reviewed property listings that included flood risk were less likely to look at and bid on homes in areas with a severe risk of flooding, according to new research made available exclusively to Bloomberg.

In short, transparency on risks matters, says Daryl Fairweather, the chief economist at Redfin. The real estate brokerage site conducted the study in conjunction with the University of Southern California, the National Bureau of Economic Research and the Massachusetts Institute of Technology.

"Climate change is actually impacting economic decisions that people are making," Fairweather said in an interview. "We didn't have evidence of that before. Definitely not in the housing market. And now we know that if you give somebody information about flood risks into the future, it's going to change whether or not they decide to buy a home."

From Oct. 12, 2020, to Jan. 3, 2021, Redfin ran an experiment on 17.5 million of its users across the United States. As prospective home buyers entered the site, Redfin assigned them randomly to either a group that was shown flood-risk information on each property or a group that was not.

The flood-risk scores came from First Street Foundation, a climate and technology nonprofit that works to make climate hazards more transparent to the public. In June 2020, First Street published the first public maps that revealed flood risk for every...