Hot Property

Climate change will affect real estate values all across America. Is Vancouver the next Napa?

The view from the terrace, 11 floors above Miami's trendy South Beach, is dominated by a sweep of Atlantic Ocean that edges along a narrow arc of beach and stretches out to a flawless horizon. It is the kind of view that has enticed millions to invest in a booming South Florida real estate market. Now, after three years of devastating weather events, that boom has gone bust, and even after carefully pricing the condominium to undercut several others for sale in the building, the owner had to cut the price not once but twice before it sold. At a loss. "The market is flooded with properties," says Phyllis D. Hugunien, a Realtor for FX Realty Corporation. "They aren't selling. We're seeing price reductions of $20,000, $50,000, and more. Buyers are nervous about the future."

So it goes in post-Katrina Florida, New Orleans, and the Mississippi Gulf Coast. While scientists and politicians quarrel over just how much impact climate change is having on the planet, the market has made its own decision. Anyone who owns property in these regions has watched his investment wither. And anyone thinking of buying property there will have to pay a "global warming premium" in the form of higher insurance rates.

Homeowners elsewhere shouldn't feel particu­larly secure either, according to Andrew Logan, director of insurance at Ceres, a nonprofit network of investors concerned with environmental sustainability. "The hot spot for now is Florida and the Gulf Coast, but looking to the future, climate change is going to be a huge issue in the whole country," he says. Insurance rates are already rising, and some companies are limiting coverage all the way up the Eastern seaboard to Massachusetts. Why? There's an increased risk posed by rising sea levels coupled with the prospect that unusually destructive hurricanes will be drawn northward as the Atlantic Ocean grows warmer.

What of these other hot spots? Suppose you want to buy property and you're looking at a 30-year ­mortgage. Should you consider the impact climate change might have on its value three decades from now? Insurance companies do. "Anyone thinking of making an investment in a property should consider what it will look like in 20 to 30 years," says Robert Muir-Wood, Ph.D., chief research officer at Risk Management Solutions. Will there be snow at your ski chalet? Will the shoreline stay put under your beach house? What about storms and the overall ecosystem? "If you don't find out, someone else will," says Muir-Wood, "and he'll use that information to devalue your property if you ever want to sell it."

Thanks to a report released in February by the Intergovernmental Panel on Climate Change (IPCC), the information that would devalue your property is easy to get and quite authoritative. The report states unequivocally that the earth is heating up as a result of the accumulation of greenhouse gases in the atmosphere. Over the past century, average temperatures increased 1.4 degrees, and they're projected to rise 3.5 to 8 degrees over the next hundred years. Sea levels rose by six to nine inches in the 20th century and are projected to rise anywhere from seven inches to two feet over the same time frame going forward. And these numbers are on the conservative side, because the panel is barred from considering hypothetical conditions. Estimates of sea-level rise, for example, do not include the levels that would be reached if, say, Greenland's ice sheets continued to melt at an accelerated rate. Just two feet in sea-level rise would engulf much of South Florida and the Keys, Texas's Padre Island, and barrier islands along the coast from Maryland to the Carolinas. At 15 feet, it's good-bye Florida, Cape Cod, Long Island...you get the picture.

The effects won't be uniform around the globe. The poles are likely to grow disproportionately warmer than the planet's midsection. Precipitation patterns also will shift poleward, exacerbating drought conditions in temperate regions. And the warming will produce more extreme weather conditions everywhere, more powerful hurricanes in the Gulf, more flooding along rivers in the middle of the country, less snow in some areas, more in others. The time to assess the relative risks of buying a cottage on Lake Michigan or a Miami Beach condo is now--before the next storm hits.

South Florida and the Keys

Okay, this may seem like piling on, but if there were ever a place where the risks of freaky weather should be factored into real estate decisions, this is it. Even scientists who won't swear that climate change guarantees more hurricanes that are more powerful do believe rising sea levels and run-of-the-mill storms could make Florida a challenging place to own property, if for no other reason than the insurance costs. Most companies won't write homeowners policies here, and those that do have been raising premiums at double- and triple-digit rates. To take up the slack, the state was forced into the insurance business. In fact, the largest insurer in Florida is Citizens Property Insurance, a state-owned corporation that holds the policies on 1.3 million households. Citizens couldn't hold the line on premiums either, and Florida found itself in a crisis that state lawmakers tried to solve by legislating a premium cap. The plan would increase subsidies for both private insurers and policy­holders. How? By transferring more risk to Floridians. "There are limits on how much liability the state can take on without being overwhelmed financially," says Ceres's Logan. "If Miami were hit by a major hurricane, the state would be on the hook for most of that damage. Where are those tens of billions of dollars going to come from? The taxpayers."
Barrier Islands Along the Atlantic Shore

Hop on a boat in New York City and you can cruise down the coast to Myrtle Beach, South Carolina, without venturing outside an inland waterway created by a chain of barrier islands. These slivers of sand have, for centuries, taken the brunt of whatever mischief the Atlantic threw at the coastline. But with its new climate-change-driven ferocity, that mischief is beginning to take its toll. Most vulnerable are the heavily developed islands from Atlantic City, New Jersey, to Rehoboth Beach and Bethany Beach, in Delaware.

The problem for all the barrier islands--and the beaches of Florida--is erosion. For decades, these communities have been fighting a more or less successful war to save their shorelines, but climate change is tipping the balance in Mother Nature's favor. Take Rehoboth Beach. "In the last hundred years, erosion on the Delaware coast has eaten up about three feet of shoreline a year," says Stephen P. Leatherman, Ph.D., director of the Laboratory for Coastal Research at Florida International University, in Miami. "If the rate of erosion doubles, which is possible with current climate-change projections, erosion losses would jump to six feet per year." Roll those numbers out over the life of a 30-year mortgage, and Rehoboth Beach loses a whopping 180 feet of shoreline. "Right now, most of the houses along the shore are within that 180 feet," says Leatherman. Buy a house on the beach and you could easily lose it before you've paid for it.
New England Ski Resorts

The relationship between warming climates and skiing seems obvious: no freezing temperatures, no snow. "Even if you're making snow, the temperature outside has to be less than 32°F," says Robert Mendelsohn, Ph.D., a professor at Yale University.

And even if you didn't mind trudging across grassy fields and up the lift to get from your ski chalet to a trail covered in man-made snow, simple economics threatens these operations. Bruce McCarl, Ph.D., regents professor of agricultural economics at Texas A&M University, coauthored a report in BioScience that states the cost of making snow at -12ºC is five times cheaper than at -2ºC. A big resort can spend more than $100,000 a night making early-season snow. Shorter, warmer ski seasons and significant increases in snowmaking costs add up to an economic double whammy. In the next few decades, many ski areas will become more expensive to operate and may have to be abandoned, says McCarl.

Wine Region of Northern California

Growing grapes is easy. Growing grapes that make good wine is hard. Since the 1970s, one of the most productive regions for good wine grapes has been the Napa and Sonoma valleys of Northern California. Ironically, part of the reason for that success has been global warming, according to Rama Nemani, a research scientist at NASA's Ames Research Center at Moffitt Field, California. As warming moves northward, it can push marginal climates into a sweet spot that is beneficial for a while. In Northern California, the climate trends that began in the 1970s ushered in a period of high-quality vintages. In those 30 years, the frost-free season expanded by about 40 days. "That's an incredible amount of warming," says Nemani, "and it allowed the growers to leave grapes on the vine a lot longer so that the berries could be harvested at the optimum moment."

As the warming continues, the sweet spot moves farther north, and Napa and Sonoma's time may be coming to an end. Last year, the area suffered through periods of 103°F temperatures. "The vineyards can handle temperatures in the mid 90s," says Nemani, "but not that high." What if extreme weather becomes more common over the next 10 to 20 years? "If you look at the spread of vineyards, you see every decade that more are moving north, no doubt about it. Washington and Oregon are beginning to produce the quality of wines that Northern California does." A study published in the 2006 Proceedings of the National Academy of Sciences estimates that the number of American vineyards will drop by 81 percent by mid-century, with most of the wine production limited to the Northeast, Northwest, and a narrow strip along the West Coast.

And now vineyards in British Columbia are making good wines. "The Canadians are rubbing their hands together over the prospect of wineries on Vancouver Island and the Okanagan Valley. They think they're going to hit the jackpot with global warming," says David Graves, one of the owners of Napa's Saintsbury vineyard. There goes that sweet spot.
Rocky Mountains, Colorado

One of the most beautiful excursions in the United States is along Trail Ridge Drive over the Continental Divide. The road starts on the front range of the Rocky Mountains and climbs above the tree line into the rarefied air of the 11,000-foot Milner Pass. Once across the divide, the road winds down into a high valley where Grand Lake, the state's largest, is surrounded by mountains blanketed in thick, green pine forests. At least, that's how it was a decade ago. Today, those slopes aren't green. They're covered by dead, rust-brown trees, all killed by an onslaught of the mountain pine beetle.

The losses are staggering. In each of the past two years, the beetles killed up to 80 percent of the lodgepole pines on almost a million acres in the northern Rockies. Some of these trees are 70 to 80 years old, so it will take a hundred years to get things back to where they were. "There have been insect outbreaks as long as there have been trees, but the outbreaks we're seeing today are unusual," says Bill Romme, Ph.D., of Colorado State University's forestry department. "The beetles' life cycle has sped up, which means there are many more beetles emerging. They've spread farther north and to higher elevations. It's all being driven by the increased temperatures."

The impact goes well beyond the unsightliness of dead trees. As more pines are felled by the beetles, ski slopes at Rocky Mountain resorts will find their runs unprotected from wind. Wildlife could be decimated by a loss of habitat. And, of course, there's the risk of fire. "If someone is trying to sell you a mountain cabin, and 80 percent of the trees around it are standing dead, I think you'd ask yourself what would happen if a lightning bolt hit nearby," says McCarl, of Texas A&M. Indeed.

The IPCC's 2007 report made headlines around the world because it stated "with 90 percent certainty" what the pine beetles in Colorado and vineyard owners in Napa Valley have known for some time: Global warming is a reality, and it's playing havoc with the pocketbooks and investments of ordinary people all across the country. The only uncertainty is how quickly the world will respond to the warnings and what the planet will look like in the end. "If the warming is held in check, on the lower end of the range that we think is possible, good things are going to outweigh the bad, by and large," says Mendelsohn, of Yale. But if nothing is done and the warming is allowed to become more severe, "it's clearly going to be very harmful."

By: Nancy F. Smith for Best Life