Florida residents should flee to these 2 popular states before climate change decimates home values

Climate change will lead to warmer temperatures, intense storms, and higher flood insurance costs. Here's how to avoid a 60% real-estate market crash.

• Warmer global temperatures will lead to more intense storms, causing flood insurance costs to rise.
• Analyst David Burt believes those soaring costs will push property values down.
• Here's how homeowners in coastal cities can avoid losing hard-earned home equity.

The best time to sell beachfront property is yesterday, a bubble-spotting analyst says.

Real-estate researcher David Burt, who's best known for seeing the danger in subprime mortgages before the financial crisis, is calling for another housing market crash. But unlike 2008, this downturn will be narrower in scope and will be largely caused by climate change.

Although steadily rising global temperatures and their effects are increasingly hard to ignore, Burt believes they're not yet factored into property values. He expects severe storms like hurricanes to become more common and more intense due to warmer weather, which will cause insurance premiums to soar — thereby reducing what buyers will pay for homes by up to 60%.

In Burt's mind, there's no solution for this coming calamity. Flood insurance costs will skyrocket since they're severely underpriced to climate risk, his research indicates. And if those premiums were artificially capped, insurers may no longer be financially viable and could shut down.

"A lot of people expect these problems to be solved by government," Burt said in a recent interview. "But the government cannot change the laws of physics."

The only path forward for homeowners in markets that will be hit hardest by an exorbitant rise in home insurance premiums, in Burt's view, is to sell and move — before their neighbors do.

Lower rates might spark a domino effect of selling

Though the planet is heating up, the housing market remains frozen. And when it finally thaws, Burt has a hunch that property prices in certain cities will tumble.

Mortgage rates surged alongside interest rates as inflation spiked, and while rates have fallen recently, they're still uncomfortably high. Elevated borrowing costs have kept would-be buyers on the sidelines, which is the main reason why home sales slid roughly 20% last year.

Housing analysts say interest rate cuts, which are almost certain to arrive next month, will be a boon for the market since they'll reduce friction between buyers and sellers.

But Burt believes lower mortgage rates may have a net negative effect on home prices. He thinks the real story won't be pent-up demand from buyers — but from sellers looking to leave homes in markets that are most vulnerable to the effects of climate change.

"I think that there's a lot of pent-up supply from folks, particularly who are being exposed to these ownership cost increases away from mortgage rates," Burt said. "If mortgage rates come down, you'll have a lot of new sellers."

Property owners in coastal cities have been stuck, as getting out ahead of the coming market correction would mean leaving their mortgage and facing significantly higher monthly payments.

"They probably could be sellers, would be sellers — but they're locked into these 3% mortgages, and so they can't sell," Burt said. "So that's really the trick."

If many owners heeded Burt's warnings about the risks from rising flood insurance, they'd end up flooding the market with home supply, which would drag down all of their asking prices.

How to protect against rising flood risks

While preventing storms and flooding is impossible, Burt shared several steps that homeowners in high-risk areas can take to protect themselves from the costs of climate change.

Owners can first look at average flood insurance costs in their state and specific market and respond accordingly by adjusting their budget and reducing their debt level as needed. They'll then be prepared to either bear the burden of higher insurance costs, or sell.

"I do think it makes sense to either shore up your financial situation and leave room if you're in one of those areas, or even move and migrate," Burt said. "Even if it's just inland to a state that's 100 miles away but still gives you access to the places that you want to be."

Those who are attached to where they live may look for stop-gap solutions like putting their house on stilts, but Burt suggested that doing so may just be putting a bandage on a bullet hole.

"The return on that investment is not going to be enough to offset the cost of doing it, particularly if you're staring down the barrel of broad, community-level asset depreciation," Burt said. "So you're kind of throwing good money after bad."

Property owners looking to avoid flood risk altogether should consider moving from the coast, either inland or to another state entirely. Burt cited Georgia as a possible haven for Florida residents and upstate New York as one of the safer areas from flood risk. Those happen to be two of the 10-most populated states, though other inland locations presumably do the trick also.

Unlike Ivy Zelman, who's another analyst with a knack for spying issues in the housing market, Burt doesn't think the Midwest is the best region for beach-dwellers to flee to.

"There's these other problems that we're starting to see around convective wind damages in these hail storms and tornadoes in the Midwest," Burt said. "A lot of the places that you thought might be safer from wildfire and floods, now those are kind of an issue as well."

Although evading all of the possible effects of climate change is unrealistic, Burt is confident that property owners who act quickly can avoid losing some — if not all — of their home equity.