A $1 trillion time bomb is ticking in America's housing market
Years ahead of the financial crisis, David Burt saw trouble brewing in subprime mortgages and started betting on a crisis, winning himself a cameo in The Big Short by Michael Lewis in addition to lots of money. Now Burt runs DeltaTerra Capital, a research firm he founded to warn investors about the next housing crisis. This one will be caused by climate change.
In a webinar with journalists last month, Burt argued that US homeowners’ wildfire and flood risks are underinsured by $28.7 billion a year. As a result, more than 17 million homes, representing nearly 19% of total US home value, are at risk of suffering what could total $1.2 trillion in value destruction.
“This is not a ‘global financial crisis’ kind of event,” Burt said, noting the total housing market is worth about $45 trillion. “But in the communities where the impacts are happening, it will feel like the Great Recession.”
Burt’s estimate may actually be on the conservative side. The climate-risk research firm First Street Foundation last year estimated that 39 million US homes — nearly half of all single-family homes in the country — are underinsured against natural disasters, including 6.8 million relying on state-backed insurers of last resort.
The issue is that in many parts of the US, insurance premiums don’t reflect the risk of climate-fueled catastrophes, which is growing as the planet warms. A record 28 weather disasters in the US last year did $1 billion or more in damage, according to the National Oceanic and Atmospheric Administration.
