Weathering the storm: how climate risk is reshaping the housing market

Extreme weather events are continuing to become more frequent, severe and costly. According to the NOAA’s National Centers for Environmental Information (NCEI) and Climate Central, the U.S. has spent more than $50 billion annually on weather-related disaster events since 2016.

This climate shift is fundamentally altering the housing and mortgage landscape, driving up insurance premiums, influencing delinquency rates, suppressing home price appreciation in high-risk areas and increasing credit risk. In this blog, we dive into climate risk’s impact on the housing market and how access to granular data and holistic insights can help mortgage professionals make more informed, timely decisions to better mitigate risk and support borrowers before, during and after a disaster event.

It is typically assumed that if a mortgage has flood risk, then the property is located in a FEMA Special Flood Hazard Area (SFHA) declared flood zone and is required to carry flood insurance. However, when we take a closer look at advanced geospatial, terrain and rain data sets, there is more risk sitting outside of traditional FEMA-designated flood zones, and many borrowers with properties located outside of these zones do not carry flood insurance.

In the case of a 1-in-100 year flood event happening, ICE’s research indicates out of the approximately 53,000 homes in the U.S. that would be impacted, 85% (or roughly 45,000 single-family residences) would be uninsured, with another 6% of policy holders having coverage that is less than their outstanding mortgage balance. For investors maintaining a pool of mortgage loans, lenders operating in a specific space or servicers managing loan portfolios, a clear understanding of which loans are in this subset of at-risk properties is required to accurately mitigate risk and reduce potential loss.

Recent findings from ICE’s climate data, combined with ICE’s McDash and property insurance data, highlight a significant gap in coverage due to lack of granular climate risk insight. The data indicates that roughly 5.3 million single-family mortgage holders face some level of flood risk in a 1-to-100-year event. For a standard 30-year mortgage, this translates to about a one-in-four chance of experiencing a major flood event during the life of the loan.

Our research shows that location-specific variable costs outside of fixed-rate mortgage payments — such as property taxes, utilities and insurance premiums — can fluctuate significantly for homeowners with increased climate risk. This surge in costs is most acute in hurricane-prone regions like the Gulf Coast, but it is also spreading to the Midwest and California.

In fact, California — already the least affordable market nationwide regarding traditional mortgage payments — saw the fastest growth in property insurance costs over the first half of 2025.

Consider two similarly priced homes: one in Detroit, Michigan, and one in Miami, Florida. While the principal payments might be comparable, the Miami home has a much higher total cost of ownership per year due to fluctuating insurance premiums and property taxes.

This disparity driven by location-specific climate risks and cost variables is present in other locations across the U.S. as well, and has been increasing rapidly over the last 5-10 years. In fact, the total overall insurance premium costs in the U.S. has nearly doubled since 2014, creating cascading effects on housing affordability and introducing critical credit risks.

There is a clear, data-driven link between extreme weather events and mortgage performance. By combining historical storm data with loan-level performance data, ICE developed a model to visualize the trajectory of delinquencies for loans exposed to a major disaster event.

Taking Hurricane Milton as a case study, we analyzed 490,000 active loans in the affected area. In the month prior to the storm, the delinquency rate was approximately 2.4%. One month after landfall, that number rose to 3.4%.

During the 2024 hurricane season, which saw three major hurricanes take place, roughly 58,000 disaster-related delinquencies occurred. Expanding this analysis to a dataset of 10.8 million loans exposed to 48 historical storms from 2012-2024, for loans that were current prior to the event, ICE found that the probability of delinquency increased by over 15% during the three months following the disaster, and the recovery timeline often extends up to nine months after the event. This trend holds true across different types of disasters as well, as we saw similar recovery growth patterns take place during the Palisades and Eaton wildfires in early 2025.

Historically, the industry relied on monthly performance data, which meant a two-to-three-month data lag before the magnitude of disaster impact became clear across a portfolio. ICE’s data flows daily. This provides servicers and capital market participants with the ability to see performance-related stress and payment delays in near real-time, allowing for proactive risk mitigation strategies before the end of the reporting month.

We have also examined the interrelationship between ICE’s Climate Risk Scores and delinquencies related to flood and hurricane risk. Our models show that the probability of severe delinquency (90+ days past due) increases in correlation with climate risk. Loans with high hurricane risk are 79% more likely to experience severe delinquency. Similarly, high flood risk loans show a 43% increase in severe delinquency probability. Even for borrowers who carry flood insurance, high flood risk still correlates with a 12% increase in severe delinquency.

This risk is beginning to price itself into the market. Analysis of ICE’s Home Price Index (HPI) alongside flood risk scores reveals that high-risk areas are seeing slower property value growth. High flood risk ZIP codes are experiencing less home price appreciation than would be expected based solely on socioeconomic and geographic characteristics.

This deceleration in value growth poses a risk to collateral value. If high-risk properties fail to appreciate — or potentially lose value — it increases the risk for lenders and investors in the event of default.

These trends show no signs of slowing down, and the financial implications are becoming ingrained in market dynamics. For mortgage professionals, relying on outdated maps or broad averages is no longer enough. Mitigating climate risk requires a granular, property-level understanding of climate exposure.

By integrating advanced climate analytics, loan and neighborhood-level insights into decision-making processes, industry stakeholders can better identify at-risk properties, manage portfolio exposure and help borrowers navigate an increasingly volatile environment.

Learn more about how ICE can help provide unmatched visibility of risk before, during and after a disaster event occurs.