NerdWallet's Smart Money Podcast - Home Insurance Rate Increases and Psychological Traps That Are Costing You

Episode Date: February 23, 2026

Understand common money traps and what to do as homeowners insurance premiums rise across the country. Your brain can be expensive. That’s why hosts Sean Pyles and Elizabeth Ayoola break down three behavioral finance biases (loss aversion, herd mentality, and overconfidence) and how they can lead to costly spending and investing decisions. Then, NerdWallet editor Caitlin Constantine joins to answer a listener's question about whether buying a home still makes sense as homeowners insurance premiums skyrocket and coverage gets harder to find in some areas. They dig into “escrow shock,” FAIR plans, why some homeowners go uninsured, and practical ways to plan for higher housing costs. Plus: what renters can and should protect with renters insurance. Want us to review your budget? Fill out this form — completely anonymously if you want — and we might feature your budget in a future segment! https://docs.google.com/forms/d/e/1FAIpQLScK53yAufsc4v5UpghhVfxtk2MoyooHzlSIRBnRxUPl3hKBig/viewform?usp=header To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend. Learn more about your ad choices. Visit megaphone.fm/adchoices

Tech moves fast. So keep pace with the Daily Crunch podcast from TechCrunch. With new episodes every day, this podcast will give you a quick overview on everything you need and should know about startups, new tech, regulations, and more. Listen to TechCrunch Daily Crunch now, wherever you get your podcasts. That's TechCrunch, Daily Crunch, wherever you get your podcasts. When was the last time your brain tricked you into losing money? Almost this morning, Sean, when I'm hungry and lazy, my brain tells me that I need to get an Uber eats and I almost Uber eats some croissants. Don't judge me. I feel that. I'm the same way before Ben's scrolling through my phone and my brain is always telling me to spend money I don't need to spend. Welcome to Nerd Wallet's Smart Money Podcast where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.

And I'm Elizabeth Ayola. On this episode, we're going to answer a listener question about how climate change is affecting how people decide whether home ownership is worth the risk and the expense. But first, we're talking about the behavioral financial biases that are costing you money and what you can do about it. So as a quick recap for folks who may not know, behavioral finance is a field of study that explores how emotional factors and personal biases affect our financial decision making. And it turns out that we are not the highly rational robots making financial money decisions in a vacuum. We're actually super. Nope. We are highly irrational animals, Elizabeth.

We're basically right out of the jungle throwing money at whatever looks shiny and nice to us. But financial biases are a subset of behavioral finance. And they describe how certain preconceived notions or tendencies can lead to some less than ideal outcomes for our finances. There are so many different financial biases out there. We're not going to mention them all, but I'm going to mention a few that come to mind. First one that comes to mind for me is loss aversion. And that's the idea that losing money is much more painful than earning money. But somehow I don't think that's an idea.

It feels like a fact. And we'll do a lot to avoid this pain. Now, herd mentality is another one that comes to mind, and that is jumping on a bandwagon and taking an action just because everyone else is doing it. And Sean, that makes me think of the NFT craze during the pandemic. Do you remember that? Yes, what a scam that was. I wonder how many people are still holding on to their NFT is hoping that they'll make some money from them. I didn't buy any, thankfully.

Me either. Now we have overconfidence bias, and that's being a little too cocky about your ability to invest or make other financial decisions leading to you making risky or under-informed decisions. Okay, so let's talk about how each of these biases is losing you money, starting with loss aversion. The big issue here is often for active investors who are buying and selling individual stocks because people hate losing money so much. They might hold on to a stock that is a real loser when they'd be better off just selling that stock. Lots of people are divided on crypto, but it does make me think about that because I do peek into my crypto account sometimes and I'm like, hmm, should I sell or should I hold? But I'm just hoping that one day crypto will

retire me. We'll see. All right. I'm hoping that for you too. Thank you. All right. So here's an example of loss aversion. Let's say that you buy a stock of a company that you've been eyeing right after they go public because you think that company is going to be successful long term. You think they're going to blow up and the stock price is going to go up over time. But then, don't dumb, a few years go by and the stock is half of what it was when it went public. This, my people, is an example of heartbreak. The company doesn't seem to be on a path towards a high stock price, but you just can't get yourself to sell the stock because the idea of selling it at a loss just breaks your heart

too much. And that last part that you mentioned, Elizabeth, is the irrational bias of loss aversion. We all know it's ideal to buy low and sell high, but it's also really important to cut your losses when you can. And here's the twist when it comes to loss aversion. Selling your stocks at a loss can be a really smart financial move because when you sell your stocks at a loss, that can help you offset your gains through a little something called tax loss harvesting. Consult your CPA if you want to hear more about that. So everyone is important to know when to let go of your loser stocks.

Just really quickly, Sean, I'm curious. Have you ever done tax loss harvesting yourself? I have. Well, I had a CPA do it for me because I didn't be like doing all the math involved, but it helped me offset my tax bill for sure. Okay, I need to look into that next year. All right, herd mentality. Let's give you an example of that, guys. Now, think about the hype cycles that people get sweats up into in the finance world. We saw this with the GameStop saga a few years back. Remember that, Sean? Oh, yes. A lot like the NFTs. It's all happening at the same time. That's right. So in that case, a bunch of industry investors shorted the video game stores for, stock. Then a bunch of amateur investors on Reddit got wind of what happened and began purchasing shares, which did what? It drove up the price and resulted in what's called a short squeeze, leading the industry investors to scramble to minimize their losses. And some people made a lot of

money on that. Many more people lost money. Yeah, people can get really swept up in herd mentality during moments of stock market volatility or big trends like we saw with the GameStop event. And if So they see people panicking and selling their investments. Other folks might want to jump on the bandwagon and do the same. And this can be a big money loser for a lot of people. They sell their stocks one day when the market is down, but it might be back up to another record high the next day. And guess what?

Now you've sold your investments at a loss and you're going to have to pay more to get back into the market, all because you were following what other people were doing. Sounds exhausting and does not sound like my investing strategy. Yep. All right, Sean, so how can people not succumb to herd mentality? and then hold on to their coins instead, or in this case, investments. I would say folks should focus on their financial and investment goals and their time horizon. You realize that herd mentality also isn't limited to investing.

I'd argue that the surge in interest in things like online sports betting and prediction markets is symptomatic of herd mentality. So anytime you might get a little paying of financial phoma about what your friends or a bunch of people online might be doing, that can be a signal that you're being tempted by her mentality and the scientist step away. Let's give an example of overconfidence bias. Let's say that you have this one friend in your life who's always telling you about all the things they're doing with their money, but they don't actually have great returns

to show for it. Like they're investing in crypto, you never heard of or getting into infinite banking where you use your life insurance to lend yourself money. You have probably met someone who has overconfidence bias in that case. Yeah, this is when people have a lot of misplaced confidence in their own. abilities to manage their finances and they end up making mistakes that cost them money or maybe they're missing other opportunities to make a more secure, reliable form of money. And this affects a lot more than obnoxious finance bros too. I think we can all be susceptible to overconfidence

bias in ways that we might not expect. So one risk that comes to mind for me around this is not being properly insured. You could just be really confident that you will never face an accident or that you'll be able to cover your pets' health care if an emergency happens. So why bother getting insurance at all? And then guess what? Life happens. Accidents are going to happen. And because you didn't really think that you'd be facing these risks,

now you're on the hook for whatever bill is coming your way. So to overcome overconfidence bias, humble yourself. And I mean that in the nicest way. Realize that you're not going to beat the market. Insurance will help you whether the inevitable challenges in life and consider getting the perspectives of other people who are more experienced. than you before making risky financial decisions. Amen.

Okay. So those are three behavioral financial biases that are probably costing you money somewhere in your life. Think about your finances and examine how you can begin to counter these biases in the way that you manage your finances. So you can be maybe a little more rational as much as is possible when it comes to managing your money. And that way you won't be leaving money on the table

and spending it on things that you just don't need to. Yeah. And I think it all starts with just being a bit more mindful about your spending and just paying attention to when those biases come up. And obviously, it's a work in progress. And also not rushing into decisions. I think a lot of people lose money because of these biases because they feel this sense of urgency, especially around things like herd mentality. So take your time people. There's often never a real sense of urgency around investing in one company stock. This, Sean, I feel like you are leading into the February challenge because as you said that,

our finance challenge that we're doing, I just had a little tinge of guilt come up. So yes. Okay, so folks you may not know, we've been doing a February financial challenge where I'm adding more friction into my spending. Elizabeth is doing a no spend month of sorts. And Elizabeth, tell me how it's going for you, not so well. Okay, okay, okay. I'll start with the good. The good is I actually haven't been buying things. I have been putting myself in compromising situations where I could buy things. Oh, no. Like what? Like going to the mall and window shopping. or going to the thrift store. But luckily, not seeing anything, I feel like I needed to leave it.

But you didn't spend your money. Wait, I haven't yet. So that's the good part. I'm going to shut up and listen. February isn't over. So I guess in conclusion, I did good over the past week. However, however, I'm going to save you the details of what happened recently. But I was just snooping around on Facebook in one of my groups because I'm in like

5 million Facebook groups. And someone was talking about laser. And then they were like, oh, there's this person whose company is close to where I live who's doing a special on a full body laser, TMI, but you know. Like a hair laser? Yes, hair laser removal. So I'm going to become a hairless cat. Okay, that's too much information. And how much is this going to cost you?

Oh, my God. It's a discounted price, Sean. I haven't paid yet. But my appointment is in the last week of February, which would mean it's the month of our challenge. and it's only $900 for me to become a hairless cat. Only $900. From what I understand, you need multiple rounds of treatment to not have any hair and to be a hairless cat as you want. So it's $900 this one time or $900 each time.

$900 this one time. And then you need like maybe one or two top ups a year, which will be maybe like $100 for the whole thing. So let's say an extra $200 commitment a year. And then I tried to girl math it. And I was like, well, if I bought razor blades for the rest of my life, how much would that cost? Okay, okay, okay. I hear that. There's something nice about, you know, being soft and taking care of yourself and only spending, what, maybe $1,200 on all of this.

I would double check the credentials of the place that you're going, make sure that they have all their licenses and everything because you don't want some back alley laser burning. I know. Good point. So in conclusion, I haven't spent the money yet. It's not too late to cancel, but this is how it's going. Okay. I'm actually okay with that because you're getting a deal. And hey, maybe just for the sake of it, you could have your appointment in March if you want to be really pure and good and follow your assignment.

I know, right? I know. We'll see. I'm going to keep you posted. All right. I've told all my business, Sean, it's your turn. Okay. Mine's been a mess.

I'll be honest. I made this really chaotic month for myself where each week I was doing something different. I had a week where I was only spending with cash. And that went okay in the beginning. like I got a haircut and I paid for that with cash. And then other things kept popping up. Like I randomly had to get a whole new terrarium for my gecko. I've had the same terrarium for 23 years.

I had to get her a new one and that came with other things I had to get with it. My gecko was still alive. Don't worry. But the terrarium is all right. Yeah, that was for the terrarium. Yes. And that cost me what, like $90 something dollars for all of that. I had the cash on me, but I didn't want to have to go back to an ATM later that day.

So I just said, whatever, I'm using my card. Those ATM trips are the worst, honestly. This was the same week of the Olympics opening ceremony. I love the Olympics so much. I was hosting a party for my friends to watch the Olympics opening ceremony. What snacks did you have? I made Taramassou. It was my first time ever making it, and it was really good.

My secret is using more rum than they tell you to. It was some boozy terramus soup. And guess what? I used my card to pay for all that stuff. Like at the liquor store, I'm not going to be pulling out a bunch of cash to buy my rum and what have you. So I really appreciated the friction that it did inject in the purchases where I decided to use my cash. It made me more thoughtful about it. And it also helped me shift my mindset around cash because in the past, I don't know, decade plus,

because I've so rarely used cash, it's felt like already spent money. You know what I mean? Where it's like it actually isn't money that's mine. I've already pulled it out of my account. The number doesn't exist. So it's free money. Whereas when I was having it in my wallet, I was pulling it out. I was counting it.

I knew how much I had. It made me feel like it was actually real dollars, which it was the entire time, but it made me feel more accountable to myself. So that was good. And I'm okay having not used it perfectly for every single purchase because it kind of added the friction that I wanted it to, even though, you know, we live in a very largely cashless society. Yeah. I went to one bar where they didn't even accept cash. Oh, wow. So it's just it's hard to make it work nowadays. It is hard. And I, hats off to you, because I wouldn't even attempt to try to use cash. would be a hot mess. I probably will lose the cash. You know, I like to leave my wallet in my car. Maybe the cash is in the car and someone stole it. Okay, going too far left here. But I think you have emulated having a healthy relationship with your finances. I love how you're not

shaming yourself, even though you didn't do things perfectly and how you're also taking away learning still. Yeah. And I think I would like to incorporate more cash into my spending so I can be more accountable with it. But one of my big takeaways here is that like frictionless habits die hard, there's a reason why all of these tech companies are making it frictionless for us to spend our money in every single way is because it's super easy to use it. And it makes you go back for more and more. And so I'm trying to break that habit and at least be mindful of when I am falling into some sort of frictionless spending that's been designed to take my money from me. Yeah. Well, I don't know that I'll adopt any of the things that you tried, Sean. I have been thinking before I

spend, which is important. And it sounds so simple, right? But it's like, do I really need this? And I think that has been very helpful for me throughout this month. Is there something about just having a moment to pause and think, am I going to spend my money here or not? Or if I am going to, why am I going to and what do I hope to get from it? Becoming a hairless cat. That's a good investment. I love it. In a moment, we explore how climate change is affecting whether home ownership still makes economic sense. But first, listeners, you know what's up. This is a show that runs on your financial questions, whatever it may be, there's no question that's too big or too small. We want to answer them.

Whether you are thinking about how to eliminate some of your own financial biases or you're trying to become a homeowner or want to make a large expense that's going to change your life like me. Whatever your money question is, please leave us a voicemail or text us on the nerd hotline at 901-730-63. That's 901-730 N-E-RD. You can also email us at podcast at nerdbawot.com or leave us a comment on Spotify or or YouTube. Okay, this episode's money question is coming up next. Stay with us. We're back and answering your money questions to help you make smarter financial decisions.

This episode's question comes from a listener's text message. Hi, nerds. I was hoping you could do an episode about the way climate change is affecting the calculus of whether or not to buy a home as insurance coverage availability and home expenses shift across the country. For reference, I live in the Twin Cities in Minnesota, so I'm not subject to rising sea levels, but tornadoes, high winds and hail seem to be becoming more problematic. Thank you. To help us answer this listener's question on this episode of the podcast, we are joined by editor and content strategist, Caitlin Constantine. Caitlin, welcome back to Smart Money. Thanks so much for having me back. Hey, Caitlin, good to talk with you about a subject that we talked with you a lot about a few years ago

because we did a whole three-part series about how climate change is affecting our finances and home buying was part of that. So thank you for revisiting this conversation with us. I would say my pleasure. It's unfortunately not the most pleasurable stuff to talk about, but I am glad to be able to talk about it because it's so important. So in the time since we first published your series about the impact of climate change on our personal finances, what has changed except for maybe the world being a bit warmer and more chaotic? So the main thing that has happened is that the trends that we talked about last time, they've really just continued to unfold. So for instance, we've seen more severe destructive weather since we talked in May 23. However, in the past, we mostly talked about those billion-dollar disasters like hurricanes and massive wildfires, but now the focuses on localized weather events like tornadoes and severe thunderstorms. And these have become more costly.

And hail is a huge part of that. Extreme hailstorms in particular are becoming more common. And the costs associated with hail damage are becoming bigger along with the frequency. And then the Great Plains in particular are at high risk of these hailstorms. So we're actually starting to see home insurance become really expensive. in places like Nebraska and Oklahoma as a result of this. So it's a really stark reminder that climate change is going to likely be felt in ways that we are not expecting and that we're probably all going to feel it no matter where we live.

Well, what other trends are we seeing in the housing market, Caitlin? I know insurance has become more and more expensive. Yep. It has definitely become more expensive for more of us. So a 2025 analysis by the Consumer Federation of America found that between 2021 and 2024, home insurance costs increased by 24% across the country. It was even higher in places like Utah, Illinois, and Arizona. The report also found that 95% of zip code saw increases.

So the impact isn't localized like it used to be. Like, we're all feeling it. Yeah, the climate change expenses are kind of coming home to roost. They kind of are. Yep. Yeah. Yes. Yeah.

And it doesn't seem like it's actually going to get better because there's a lot of analysts out there saying that we're supposed to see probably increases for the next two years, at least. Great. makes me feel concerned about, you know, aspiring homeowners and what they're going to look forward to in terms of insurance prices. There's definitely a lot of indicators that this is impacting how people are approaching home buying. So we've recently published a survey that looked at homeownership and environmental risks. And 15% of the people who don't already own a home, they said that the costs and difficulties of getting home insurance now are preventing them from actually buying a house right now. So it does have an impact on people's ability to buy.

a home. Elizabeth, I know that you are a proud renter. How is climate change affecting this fabulous for you? Luckily, my landlord has not decided to increase my rent. So this is my second year in this house and I haven't had a rent increase. So hopefully that continues. Fingers crossed. So Caitlin, what else are we seeing as a result of these continuing trends? There are two really concerning things that are happening. The first one is that more people are just going without home insurance altogether. So once you own your home outright, you don't have a lender and and your lender is no longer requiring you to have home insurance. And so a lot of people, they're like looking at the numbers, they're doing the math,

and they're thinking that the money that they would have spent on home insurance, they should save that in case they need to make repairs later on. I've read a few reports, and they put the number anywhere from one out of every seven or one out of every eight homeowners in the United States are going without home insurance. So these are people who, if the worst should happen, they're going to have to pay to rebuild and repair their home and their stuff out of pocket. And we have to be realistic about the fact that a lot of them are probably not going to be able to afford it. Then it's hard to get insurance at all in some places, right?

Yeah, it is getting harder in a lot of places. A lot of us know about what's been going on with California where several major insurers like Allstate and State Farm have cut back on how much coverage they're doing as a result of all the wildfires that have been out there. Florida saw a lot of major insurers leave decades ago after Hurricane Andrew. And so now a lot of homeowners there will end up with a smaller local insurance. that they may never have heard of before. So a growing issue, though, is that now states that have availability issues are starting to force more and more homeowners onto these state run of insurers of last resort. They're called fair plans, which is fair access to insurance requirements plans.

So these are plans for homeowners who can't get insurance for the private market, and they tend to be more expensive and they provide less coverage. So that's just further exacerbating the affordability issue around home insurance. Absolutely. Okay. So let's talk about the housing. market itself. How has climate change changed that? Well, it's no secret that it is getting much more expensive over the past decade. And the rising cost of insurance actually do pay a

significant role in that. So in 2016, home insurance was just like an afterthought when you were buying a house. It was like one of the last things that you did before the house was yours. And you could assume that the cost of your insurance premium was going to remain stable, something that you could kind of count on as a budget item. But then, as we already discussed, a lot of people have seen their premiums go up and in some cases pretty dramatically. So a lot of people are now being categorized as what's known as escrow burdened. And this means that they pay more in property taxes and insurance than they expected when they initially bought their home. So this recent report from risk analysis firm Catality, they found that average escrow payments are up 45% nationally over

where they were five years ago. And that's driven in large part by big increases in the Midwest in the South. And in fact, it's actually becoming more common for people to pay more more in property taxes and insurance than for the mortgage themselves. So this not only hurts existing homeowners, especially people who are on a fixed income, but it also makes it harder for people who are trying to enter the housing market in the first place. So, Caitlin, how does the housing market look different as a result of all these changes in our climate? I also wonder if people are changing how they're building houses as a result of climate change as well, Caitlin. So it's interesting.

The industry is evolving at every level because they really recognize the enormity of the risk. So there's more emphasis on making homes resilient to climate damage. Some examples include impact-resistant roofing, which can really cut down on the damage caused by hail or wind. You can build houses, roofs, and windows out of fire-resistant materials. In areas with high risk of flooding, living spaces are being elevated to minimize the flood damage. There's also a lot more focus on making homes more energy efficient, which is great because it saves money while also making your home safer during extreme heat or cold. Those can be very deadly for people, especially if you're like a sick person or you are an elderly person. So a recent report from Realtor.com, I thought this was really interesting.

They found that four of the top five trends in homes are currently tied to energy efficiency and stability. As recently as last year, people were more interested in cosmetic features. This is a pretty fast turnaround in consumer behavior that literally just happened within the last year. Finally, something I want to call out is that engineers and builders are also looking for ways to make the construction process overall, less carbon-intensive. And one of the things that they're doing is looking at ways to use materials other than concrete. The production of cement and concrete is a major source of greenhouse gas emissions. And so there's a lot of attention on addressing the problem of climate change from that angle as well. Okay. Well, those actually seem like some positive changes,

even though things have been pretty bleak so far. You can see some positive signs. I mean, it's a hard conversation to have, but there are signs that people are becoming more aware and that they're adjusting and their, or adjusting their behaviors as a result of it. Yeah. Okay. So getting to the core of our listeners question, how does everything that we've talked about so far change the calculus around home ownership and the risks involved? Well, I mean, I know it does seem riskier than it did in years past. I would have a hard time arguing with that. Honestly, 10 years ago, the idea that climate change could impact our ability to afford a home and then maintain it, I don't think that a lot of us really appreciated

how much it would impact us. I mean, I don't. think that I fully appreciated that as well. And now here it is, it's a serious problem with concrete impacts that's impacting communities all over the country. And the risks are significant for both of us as individuals as well as communities. So it is important to take this seriously. And so my advice to people is to really take a big picture view of the situation when you're buying a home. Don't just think about like here and now, right? Think about what might happen down the road as well. So for instance, look at what climate risk is going to look like for that home. There are online tools available that can help you assess the risk for that home. One that I really recommend is from First Street, which is a firm that specializes in climate risk. You can just put the address in and it will pop up your rating risk for certain climate risks. I find that to be really helpful when making an informed decision about whether or not to buy it in a place.

And I'm thinking to when homeowner insurance goes up, as Sean kind of alluded to, sometimes that means your rent goes up. So from a renter's point of view, is there anything that you can think of that renters can consider before renting a property, especially if they plan to stay? their long term. So renters are actually in a position where you don't have to insure your property. Renters insurance doesn't cost quite as much for you and it is not as susceptible to the fluctuations of what's going on. You're primarily covering the cost of the things that you own. So I would recommend that anybody who is renting get renter's insurance. It will cover all of your belongings. You probably are underestimating how much all of your belongings are worth and you won't realize how much you actually had until it is gone. So I strongly encourage renters to go ahead and buy renter's insurance. Yes, you might not necessarily be as impacted by what's going on because you don't own

like a physical house. But people who rent are being impacted by wildfire. They are being impacted by flooding. By the way, renter's insurance does not cover flood. In fact, home insurance does not cover flood. I feel obligated to say that every time I mention flooding. But you do want to make sure that your stuff is protected because if you lose all of your stuff, that is a lot of money that you are out. And it's also a lot of heartache who wants to lose all of their stuff on top of everything else. So that would be my advice for mentors. Eventually, rent is going to become more expensive as the owners of these properties who have mortgages are paying more for their home insurance. And that's eventually going to have to trickle down and to hire rent, right? Yeah, it will eventually trickle down, unfortunately.

Well, back to people who are buying homes, how can they plan for these costs and consider them and bake them in from a dollar and cents perspective? Well, I think the first thing that you need to do is assume that you are going to end up paying more in escrow than you are now. Don't assume that your home insurance and your property taxes are going to hold steady because they probably won't. I ran into this myself when I lived in Florida. My property insurance increased to a point that my escrow did not increase with it. And I found out that that happened when I got a cancellation notice from my property insurance

company. Oh, no. Fortunately, everyone was very good. I got on the phone with my lender and with my property insurance company and we had it's sorted out. But getting that kind of a letter in the mail can be, you know, it can be a little heart-stopping. So definitely just be prepared and pay attention to those bills when they come in so that you're not caught off guard like I was if your escrow payment is no longer covering the cost of your insurance and your property taxes as well as your mortgage. And then if you do end up buying,

I really encourage you to take a look at what steps you can make if you're to make your home and your property more resilient to whatever climate risks you might take. I mentioned that tool from first straight for street before. Take a look at that. Assess what risks you might actually face in your new home. And then look at what improvements that you can make. Improvements range from pretty inexpensive to like stuff that you can do with your landscaping to actual improvements that you can make to your roof and to the structure of your building. There's a wide range. You're probably not going to be able to afford to do everything, but you can definitely afford to do something and something's better than nothing. So I definitely encourage you once you make that decision to buy a house,

what you can do to make your home more resilient and to mitigate the potential for damage. And a lot of insurers are also incentivizing you for doing this. So make sure to reach out and ask them. Are there discounts for a new roof? Are there discounts for doing any sort of like fire mitigation? They will let you know. So talk to them, have a conversation with them and you might be able to save money on your premium. So ahead of this conversation, Caitlin, I looked into a report from Jupiter, which is a company that models climate risk. And this report found that the housing market may actually be currently underestimating the impact of climate risk on home values, and that we may be in a climate-related housing bubble of sorts.

In what they call climate hotspots, homes may have more than $70,000 in climate risk that is not priced in, which could reduce the value of these properties. The report also showed that for every $100 increase in climate-related premiums, property values dropped by an average of $1,000. So I imagine that's all going to tip the scale as for some buyers and make home buying less appealing. What are your thoughts here? I mean, my thoughts are that it's really troubling. This is something that experts have been predicting happening. And it makes me think of a recent report from NPR that found evidence that

home insurance costs are actually already starting to depress property values in parts of the southwest Gulf Coast of Florida. Lee County, which is really vulnerable to seeing really severe weather. They're starting to see indications that the home insurance costs are impacting the ability to sell homes at the prices that buyers want. It raises a lot. It raises a lot of questions because for many of us, our home is our most valuable asset. And people build their financial plans around the assumption that their home is going to either grow in value or at the very bare minimum maintain its value. And if you start seeing homes losing value, like, what does that mean for the financial well-being of those homeowners? And what does it mean for the property tax base

of that community? And then what happens if homeowners who owe more on their homes than their homes are actually worth? What if they decide to walk away from their mortgages? The risks and And the impacts can ripple outward in ways that are significant and far-reaching and potentially very destructive. And it raises the question of what happens if an area actually just becomes uninsurable. So when that happens, the only people who are in a position to buy a home in that area will be cash buyers, because lenders will not write mortgages for homes that cannot be insured. And so that could very well lead to the collapse of the housing market. So it does raise a lot of concerning questions for what the future will look like for communities that are at high risk of climate

related disaster. Well, geez, we've painted a pretty bleak picture here, Caitlin, although it's the truth, is pretty bleak. But do we have any bright sides of how climate change might be affecting the housing market? Maybe just even through raising awareness. I've learned so much through this conversation as a non-homeowner. But yeah, what do you think? Well, I do agree that it is pretty bleak.

But I do see a lot of signs that people are becoming more aware. So I'll tell you, when I first started working on this topic in 2023 for this podcast, people didn't understand the connection. Like I had to really kind of walk them through it. And now I mention it and they go, oh, that's right. And that is really the first step because awareness is what will lead to changing behaviors. And changing behaviors is what leads things to start rippling throughout. So on our survey, the one that I referenced earlier, we found that 30% of Americans who are planning

and buying a home in the next five years, they're actually going to take the risk of severe weather and natural disasters into account when they're deciding where to buy. And that survey also found that 10% of people who don't own homes right now, they're just deciding not to pursue home ownership right now. And they cite that the costs and risks of climate change are one of the reasons why. So this awareness is like actually starting to trickle down in the industry because of what I mentioned with these consumer changes. Home builders are prioritizing energy efficiency because homebuyers want it. There's a push underway from both industry groups and from governments to get more insurance companies to offer discounts for homes that are climate resilience. And many state and local governments are updating building codes, construction standards, and zoning to make homes safer and more resilient.

And then I finally want to call it a couple of things that I think are really notable. So in December 2024, the Senate Budget Committee actually released a report and a data set about climate change and home insurance. And this was a first of its kind. This is the first time that that has happened. And then in December 2025, two Washington state homeowners filed a class action lawsuit against the fossil fuel industry on the grounds. that they contributed to a spike in natural disasters that has led to more extensive home insurance. And that lawsuit is the first of its kind as well. And I fully expect that we're going to see more first like this as time goes on. Okay. Well, it's clear that we're seeing a lot of action

happening as a result of people being made more aware, like you said. So hopefully this conversation inspires more people to take account of how climate change could impact the calculus for them. Even if the action is a lawsuit. All right. Well, thank you, Caitlin, for coming on and talking us through climate change in the housing market. Happy to do so anytime. You know that I will always come on and talk about this. And that's all we have for this episode. So, do you want the nerds to answer your money question? Leave a voicemail or text a nerd hotline at 901-730-6373.

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