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Americans Are Paying $34 Billion Too Much for Houses in Flood Plains

Researchers assembled a historical database of U.S. flood maps and home prices to estimate how much bad communication costs homebuyers.

Flood water surrounds a home following Tropical Storm Imelda in Fannett, Texas, U.S., on Friday, Sept. 20, 2019. 

Flood water surrounds a home following Tropical Storm Imelda in Fannett, Texas, U.S., on Friday, Sept. 20, 2019. 

Photographer: Sergio Flores/Bloomberg
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At least 3.8 million U.S. homes lie in flood plains. Together, they may be overvalued by $34 billion.

New research published today in a National Bureau of Economic Research working paper shows that markets fail to incorporate risks from flooding and climate-related catastrophes. Losses from extreme weather events are rising, a function mostly of people and wealth becoming more concentrated where they’re most vulnerable. If home prices more accurately reflected risk, the researchers say, there’d most likely be less development in flood plains.