I have been thinking about this paragraph from this article:
...only the affluent will be able to afford to insure themselves against the extreme weather, floods and wildfires on our warming planet. People of more modest means will simply be priced out, industry experts say.
I just read recently that 42% of home owners do not have a mortgage. If you don't have a mortgage and you are sufficiently wealthy, I suppose it's possible to self-insure. But anyone who has a mortgage typically must have home insurance. Wonder what this is going to lead to.
Home prices and insurance costs have been skyrocketing recently in tourism destinations, like California and Florida. Everybody wants to live in paradise where the weather is never cold. Of course, the problem is these places are disaster-prone. It costs an enormous amount of money to maintain a structure there, even if we use insurance to float out the costs from hurricanes, earthquakes, and wildfires.
Some possibilities, which are not mutually exclusive:
1) Exclusivity Scenario: The high costs of living in these locations make them exclusive, and therefore even more desirable on a sustainable basis. These regions become bastions of the rich, and the wanna-be rich move there in an attempt to scrap their way to the top serving the needs of the rich. With each disaster, more of the wanna-be's are sent packing, completely broke and homeless. This makes the demographic even more predominantly rich and desirable. Basically, "if you can afford the insurance or self-insure to rebuild your home every few years, you may live in our state. Otherwise, this is not the place for you." Media and social media flock to the aspirational goal of walking on the beach someday, and everyone continues propping up the cost and desirability of living in these places. People continue to sacrifice other sorts of goals (homeownership, financial stability, retirement, kids) for the chance to live in the most popular locations. Meanwhile, states that are not resort destinations are seen as places where all the failures and poor people live. This is an extension of the concept of exclusive neighborhoods with expensive HOAs and minimum house sizes being seen as more desirable than regular neighborhoods by lots of people.
2) YoYo Housing Market Scenario: The housing ponzi scheme reaches a tipping point where there are no more buyers willing or able to pay millions of dollars to live in the places. At that moment, supply>demand and a price collapse begins, which prompts more people to try to sell, which leads to further price collapse. The 2008 housing correction could become a self-fulfilling pattern, as people who overextended to speculate on RE are forced to sell en masse, and are followed by new money expecting to buy the dip and ride the new trend up. A yo-yo effect occurs and the observation of a pattern attracts even more money. Prices zoom up and down for decades as investors try to time the market with leverage.
3) Tech-Induced Opportunity Equalization: A growing percentage of the population with WFH jobs says "fuck this, I want to live somewhere less naturally and financially precarious. I'd like to be able to own my own home, have kids, and/or retire someday." and so the migration to places like Tennessee, Colorado, or the midwest continues. Meanwhile, the Big One or more wildfires hit California, and a large Florida city gets hit hard by a category 5 hurricane, killing over a thousand people. The new cultural sense of luxury shifts from living 2 hours from the beach to being able to afford a home - anywhere - and not worry about its eventual destruction. The price of real estate nationwide evens out, as the benefits of nice weather locations are offset by their costs and risks, and as WFH equalizes opportunities across geography. Meanwhile, self-driving cars make it more popular to live 8+ hours from vacation destinations. People just let the car drive them across the country overnight while they sleep. A lifestyle of getting off work in Missouri on Friday afternoon, and waking up at the beach Saturday morning becomes possible, which means there's no need to own real estate there.
4) People start to want the cold. As summer temperatures keep climbing, mass-casualty event heat waves from 110F to 120F start making the news. After a few tens of thousands of people die, the new concept of luxury might change from watching the waves to watching it snow. With WFH reducing the demands upon commuters, cold weather might be seen as less of a problem than we currently see it. Within a generation, the concept of "good weather" may shift from tropical sun to midwestern spring and fall days. Whereas the boomers fled the winter cold, the next generation might flee the summer heat, moving toward the northern half of the continental U.S. The coasts are also a good place to escape heat, but with higher heat comes more hurricanes and the associated costs.
As I walk through each of these scenarios, I'm struck by how much our concept of value is driven by cultural ideas about what the good life is supposed to look like. "Going to the beach" as a valuable thing to do is a cultural construct. It could be replaced by "own your own home" or "live somewhere where it never gets 100F" or "try to live where the rich people are living" or "playing with the kids in the snow" because these cultural constructs have equal tangible value for most people. It's just a matter of mass culture and which way it moves.
