More homeowners disaster-proofing homes, Freddie Mac finds

Interest in disaster planning is growing as more borrowers experience related hardships, and insurance is taking a back seat to home improvements as they do, according to Freddie Mac's new analysis.

Nearly one-quarter of 23.3% U.S. households took steps like storm- or fire-proofing their homes last year, up from 17.6% in 2022, but the share that bought more coverage remained unchanged at 5%, analysis of data from a Federal Reserve survey shows.

The Freddie Mac analysis highlights how consumers are managing the tricky balancing act around disaster risk management and costs, mirroring some of the private and public-sector policy struggles in this area in ways that could reshape residential trends going forward.

"As households face various financial and non-financial challenges during natural disasters, their response can considerably shape the future of real estate markets, particularly their location choice and housing protection," members of Freddie's economic team said in their outlook report.

The analysis of the data from the Survey of Household Economics and Decisionmaking finds one out of every five households experienced a financial concern stemming from a natural disaster last year. More than a third think disaster risk will rise in the next several years.

While the rate at which households bought additional insurance was flat on a net basis in the past year, there was relatively more interest in this on the part of people who anticipate natural disaster risk is rising and homeowners with mortgages. Borrowers typically have some coverage mandates.

In addition, "almost three out of 10 Hispanic and Black households, who were among the larger share that were evacuated temporarily or displaced longer term, improved their property to reduce risk compared to their counterparts," Freddie Mac economists said in their outlook.

Relocation also was an option investigated by roughly 16% of all respondents between ages 18 and 44 facing natural disaster risks, with renters, households earning less than $50,000 annually and those exposed to risks like wildfires in the West having a higher propensity to do this.

Floods were a concern with homeowners in 2023 too, and could be to an increasing extent going forward.

Funding for the National Flood Insurance Program has been one of the points of contention in fractious congressional budget debates. Private insurers covered one-third of flood risk last year, with the NFIP accounting for the rest.

Also, the Federal Housing Administration is implementing a new rule which would mandate some structural improvements around elevation in high flood risk areas starting on Jan. 1 of next year.

The FHA released draft implementation guidance for new construction properties on Tuesday, providing a short comment window on it ending Oct. 7.

The Mortgage Bankers Association, which had asked the FHA for more details or a delay and had noted some concerns about the measure's costs, was still reviewing the guidance at deadline.