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Orlando, Florida

Florida’s “City Beautiful” Endures a Statewide Market Shift by Carole VanSickle Ellis The third-most-visited city in the United States could see a shift in the next few years as formerly happy pandemic-era homebuyers put their properties back on the market and flee inland once more…or the market could “correct” in one of the gentlest “softening” events in the country. Analysts can make compelling arguments in both directions. “Florida’s real estate market has a split personality,” wrote Realtor.com data journalist Evan Wyloge in August 2024. The same is arguably true on an individual level for at least some of the state’s markets, including Orlando. After weathering multiple named storms in 2024 alone, including Hurricanes Helene and Milton, many Orlando residents say they are considering listing their properties and relocating closer to their pre-pandemic stomping grounds. Given how prices have risen over the past four years, many expect to liquidate to great effect and, furthermore, they have high hopes of an expedited experience thanks to rising demand for housing around the country. The sales process, however, may not go as smoothly as many expect. “We could see some price deterioration in some areas,” warned Florida Realtors chief economist Brad O’Connor in an interview with the Wall Street Journal in early October of this year. He added, “[There has] definitely been a sizable increase over the last couple of years in inventory.” The combination could spell bad news for Florida homeowners who purchased at peak pandemic pricing and are now hoping to sell quickly for top dollar and make an exit. While Orlando has not been hit as hard as much of the Gulf Coast of Florida this year, the city did experience tangential economic impact from the rough weather associated with Hurricane Helene. The storm made landfall in northwest Florida but created a preemptive economic impact as Orlando’s theme parks and other tourist attractions and services shut down or cancelled certain seasonal events. Orlando experienced more direct damage from Hurricane Milton’s flooding and extremely high winds, which caused damage in the Orlando area as well as throughout much of the state. Investors should note Orlando may be classified as an “inland market,” but this does not exempt it from looming threats associated with the departure of property insurers and rising rates associated with inland flooding and other natural disasters. Unfortunately, the classification often causes property owners to forego flood insurance if they are not located in an officially designated flood plain. Some insurance companies in the Orlando area will not insure properties once they reach a certain value unless the owner also takes out flood insurance even if the property is not in a flood plain. These storms and others are causing property insurance premiums to skyrocket across the state, including in Orlando. Katherine Frattarola, an insurance agent at a firm catering to high-net-worth clients, noted earlier this fall that many of her clients are reconsidering waterfront Florida property acquisitions in response to these premiums. “People are making different choices as a result of the rise in insurance costs,” Frattarola told WSJ. According to a report from the Florida Policy Project, Florida homeowners saw rates rise 45% between 2017 and 2022. Since 2022, areas hit by hurricanes have posted insurance premium spikes as high as 400%, according to Moody’s Analytics. Moody’s also predicted rates would rise still higher in areas affected by Hurricanes Helene and Milton. Although state legislators have attempted to insulate property owners from instability in the insurance market by creating a $1 billion “reinsurance fund,” disincentivizing “frivolous lawsuits,” and establishing stringent deadlines for the claims process, it appears unlikely that such measures will hold in the face of homeowner discontent and increasingly strong hurricanes and rainstorms. Florida governor Ron DeSantis noted more than one in 10 Florida homeowners do not have property insurance (vs. about one in 20 nationally) and expressed hope that the bill would keep the state’s residents insured at affordable (or at least only gradually rising) rates. Critics of the bill said it would not stop rate increases or cancellations; investors should note ten insurance companies had left the state due to “choice or insolvency,” as the Insurance Information Institute described it, as of August 2024. Florida’s “Split Personality” Could Make Orlando Investing Complicated As the state of Florida experiences volatility in the housing market, markets like Orlando are divided not only by the extent to which they are affected by extreme weather but also by housing sectors. For example, insurance premiums and fees play an outsized role throughout the state, but particularly in prime landfall locations on the coast. On the other hand, state regulations on condominium assessments and related regulations have softened up the condo market substantially in the past few years, including in the condo-flush Orlando market. At present, about one-third of all listings in Orlando are for condo properties. “Nobody can afford the association fees anymore,” realtor Jennifer Levin told Realtor.com in mid-August of this year. She cited legislation enacted in the wake of the tragic collapse of the Miami Surfside condominium building in 2021 as a significant component of the softening condo market. “The big pullback in the market is in the condo market because of rising insurance costs and new laws that require buildings to have full reserves by next year,” Levin said. Realtor.com reported condo prices have fallen about 12% since 2022, while single-family homes have held steady or risen in value in most markets. In Orlando, single-family home median values were up slightly year-over-year in August 2024, reported Bankrate, posting gains of 9.3% year-over-year but falling slightly from a July 2024 peak of $412,000 to $399,000 in August. Readers should note the state of Florida remains one of the most attractive states in the country for new residents and gained a net of nearly 250,000 new residents in 2022 alone according to the most recent available data from the U.S. Census Bureau. The Orlando-Kissimmee-Sanford metro area holds steady in the top three most-popular Florida metro areas and

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Dissecting the Data

What a Year’s Worth of Investor Input Tells Us About the Future by Mitchell Zagrodnik RCN Capital and CJ Patrick Company’s Investor Sentiment Survey, which launched initially in Spring 2023, gauges real estate investors’ views on market conditions. The survey features a static set of questions that allow data to be compared and analyzed for trends over time. Periodically, more topical questions will also be included in the survey. With this being an election year, the Fall 2024 iteration included questions about the presidential candidates, and how investors see the market performing depending on which nominee is victorious. The Fall 2024 Survey results showed that fix-and-flip investors had an overall more positive outlook about market conditions than long-term rental investors. Where 80% of flippers believe that market conditions have improved over the past year, only 47% of rental property investors believe that today’s market is better than last year’s. As we dive into the overall sentiment from the participants in the most recent survey, the contrast between flippers and rental investors is a notable theme throughout this piece. And now with over a year’s worth of data from these reports, we can compare survey responses year-over-year. Overall Investor Sentiment As of Fall 2024, investor optimism was the highest recorded in the six quarters of the survey’s existence. When asked if market conditions are better today than they were a year ago, 68% of participants responded yes, and over 71% believed that conditions would continue to improve in the following months. Declining financing costs, increased inventory, and a gradual slowdown in price appreciation are contributing factors to that optimism. The three biggest challenges facing real estate investors are listed below, and we were able to compare the responses to the same question during the Spring 2023 survey:  »            High Cost of Financing // 62.88% in Fall 2024 compared to 72.70% in Spring 2023  »            Competition from Institutional Investors // 43.56% in Fall 2024 compared to 33.88% in Spring 2023  »            Lack of Inventory // 39.57% in Fall 2024 compared to 47.70% in Spring of 2023 The shift towards a more optimistic outlook for the real estate investment space is increasingly apparent after seeing this year-over-year change in responses. A majority of real estate investors utilize some form of financing in order to secure properties, so the nearly 10% drop in the responses year-over-year is telling. It is also notable that concern over a lack of inventory has dropped by about 8% year-over-year. Low housing inventory has been a consistent obstacle facing homebuyers over the past several years. This issue is being addressed with an increased number of new residential construction projects, specifically single-family homes, hitting the market. According to data provided by the Department of Housing and Urban Development in September 2024, the total recorded house completions in August 2024 was 1,788,000. This is the highest number on record in the month of August within the last five years. These numbers should give people confidence that this problem is being addressed. Insurance Costs Proving to be an Ongoing Issue  Insurance is a crucial factor in the homebuying process, and lately this necessary step has become a consistent deal killer. When asked if rising insurance costs or the inability to insure properties factored into the decision to invest in real estate, 80% of survey participants in the Fall 2024 iteration responded “yes.” For fix-and-flip investors, 82.9% felt that cost and availability of insurance was a deciding factor in their real estate investments, whereas only 69.4% of rental investors felt that way. Based on the responses provided by the survey, insurance issues have caused more flippers to miss out on a deal than rental investors by a difference of 73.3% for flippers versus 45% for rental investors. That stark contrast emphasizes the problems that flippers are facing when it comes to insurance, and these issues appear to be even more apparent in certain areas of the country. The issue of insurance coverage is especially prevalent in states that are susceptible to extreme weather events, with California and Florida garnering the most attention. Florida has recently experienced devastating hurricanes, which in general, are unfortunately common in the southern region of the United States. California has been susceptible to large-scale wildfires. These natural events have caused insurance rates to skyrocket, and even some insurance companies to leave these states entirely. In California, 97% of investors have experienced issues with insurance cost and availability, and in Florida that number is at 93%. The breakdown of each state based on investment strategy is below: California-based Investors’ likelihood of missing out on a deal due to insurance:  »            Fix-and-Flip: 87.5%  »            Rental Investors: 50% Florida-based Investors’ likelihood of missing out on a deal due to insurance:  »            Fix-and-Flip: 60%  »            Rental Investors: 60% The breakdown shows it has been more of an issue for flippers compared to rental investors in California, but in Florida the numbers are relatively similar by investmenttype. It will be fascinating to see if this continues to be a problem over the next 12 months. Presidential Election Factors Of the participants in the Fall 2024 survey, 51.4% are backing Kamala Harris versus 40.5% for Donald Trump. Harris is also seen as the candidate who will lead to a better investment environment. 47.22% believe that, while 39.20% see a Trump presidency as more beneficial to investors. What is interesting is how flippers and rental investors differ in which candidate will lead to a better investing environment. Fix-and-flip investors lean towards Harris with 56.9% believing she will create a better investment market, whereas 32.6% favor Trump in that regard. The opposite is the case for rental investors. 45% of the respondents believe Trump will create a more favorable investing environment, versus 39.6% believing Harris will. Some of the major talking points of the Harris campaign are policies aimed directly at long-term rental investors, like the controversial topic of rent control. Based on that, it makes sense for investors that primarily own rentals to favor Trump.

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Brandywine Cares: A New Future for Renters in Atlanta

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Investing in People — Investing in Communities Brandywine Cares, a nonprofit organization, is on a mission to transform the future for renters in Atlanta. Through initiatives in career coaching, financial education, and the power of planning, the organization strives to ensure that individuals not only establish and meet their career goals but thrive as a result of being stronger and more resilient financially. In 2024 alone, 166 participants have received coaching, with 48 people gaining employment, leading to an average salary increase of $22,000. These efforts have resulted in a total community impact of $1.1 million this year, with 280 total participants across all programs. Lafayette RE: Building the Foundation for Brandywine Cares The foundation of Brandywine Cares was laid with the support of Lafayette RE, a private equity firm managing over $1 billion in assets and 5,000 homes across the Southeast part of the United States. Recognizing the challenges renters face, Lafayette RE, led by CEO Thibault Adrien, made an investment beyond property management. “Everything started from the realization that our responsibility to communities goes beyond managing assets — we needed to create opportunities for people to understand and reach their potential,” says Thibault. With this vision, Lafayette funded Brandywine Cares’ first year, focusing primarily on career coaching as a means to address the gaps in opportunity and financial stability that have long persisted in underserved neighborhoods, affecting housing and food security, among other things. A Vision for Lasting Change The mission of Brandywine Cares is driven by Heidi Coppola, the organization’s President. With extensive experience in nonprofit leadership, Heidi is passionate about addressing the systemic barriers that prevent many Atlanta residents from finding well-paying, sustainable employment and opportunities for personal, career, and financial growth. Her dedication has been instrumental in bridging the income and opportunity gaps in underrepresented communities. For Heidi, Brandywine Cares is a vehicle to create a lasting impact on individuals’ lives and the communities in which we all live and work. “Our goal is to create pathways to stability and opportunity, so people aren’t just surviving—they’re thriving,” says Heidi. Under her guidance, Brandywine Cares has launched initiatives that provide practical skills, career coaching, and financial literacy tools. These efforts are not just about temporary relief; they are about planning and executing on the plan, laying the groundwork for long-term success and prosperity. Empowering Communities, One Story at a Time One of the many lives touched by Brandywine Cares is Keianne Hardy, who was passionate about transitioning from a career in the education field to technology. Through Brandywine Cares, Keianne received one-on-one coaching and a revamped résumé that helped her shift into a higher-paying role in the education sector, giving her room to explore additional credentials and the transition to the technology sector. She joined CareerProsper, Brandywine Cares’ six-week program designed for those transitioning into new fields, and then secured a job with a technology company, also being accepted into a technology training program through a Brandywine Cares partner. Today, Keianne has not only increased her salary but has fulfilled her dream of transitioning into a new field that offers her opportunities for personal, professional, and financial growth. As part of its comprehensive programming, Brandywine Cares offers small business bootcamps. Aleisha Kelly, a graduate from the Spring bootcamp, credits this program with helping her find the self-confidence to tell her story in an entrepreneurship elevator pitch competition, where she took first prize with a substantial cash award, reinforcing her belief in setting and achieving high goals for herself. A Ground-Level Commitment to Change While Heidi’s strategic vision shapes Brandywine Cares’ direction, Brandywine Cares’ participants benefit from the very high-quality work of its Director of Workforce Development, Tamara Allen, who leads career coaching and program development. Additional support comes from individuals like Jackie Lee, CEO of Brandywine Homes. Jackie joined the Fundraising Committee to help organize the nonprofit’s upcoming event, leveraging her deep connections in Atlanta to bring together sponsors and donors. As someone who sees firsthand the challenges renters face, Jackie is passionate about making a difference. Her efforts reflect her belief that the real estate industry has a role to play in creating a more equitable community. “Every day, I see families working hard to make ends meet yet struggling to keep up with rent and rising costs. We have to use our resources to give them a fair shot at stability and opportunity,” says Jackie. “This is a subject that matters deeply to me because I believe in the potential of our residents and the communities we serve.” For Jackie, this work is not about her vision — it is about lending her support to the cause during her free time, ensuring that Brandywine Cares achieves the impact of which it is capable. Bridging the Gap in Atlanta’s Real Estate Market Brandywine Cares’ work is particularly significant in Atlanta, where rental and home purchase prices and limited affordable housing have created hurdles for many families. As the city grows, so does the divide between those who can afford the cost of living and those left struggling to keep up. Heidi and the Brandywine Cares team understand that these challenges require more than just providing housing; they require creating opportunities for financial independence and growth. Their programs are designed to equip participants with the skills and knowledge needed to find careers, not just jobs, advance in their careers, manage their finances, and continue on the path to prosperity. This holistic approach ensures that more Atlanta families can afford safe, quality housing without being displaced from their neighborhoods. Looking Ahead: A Call to Action The upcoming fundraiser on November 21st at the Trolley Barn in Inman Park, Atlanta, marks a pivotal moment for Brandywine Cares. This event will bring together industry leaders, community advocates, and supporters united by a vision of a more inclusive future. The funds raised will enable the nonprofit to expand its programs, reach more individuals like Keianne and Aleisha, and continue creating opportunities for those who need them most. The event

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Mitigating Loss with Smart Home Technology

Be Proactive and Avoid Costly Claims by Jason Jones As a property owner, you are likely familiar with the benefits of smart home technology. But beyond the convenience of remote controls and automation, these systems can also play a critical role in mitigating loss at your investment properties. The right technology can help you avoid costly incidents that could otherwise lead to major repairs or liability claims. Smart Water Leak Detectors Water damage is one of the most common and costly issues for property owners. A leaking pipe or appliance left unchecked can cause significant damage to walls, floors, and foundations. Fortunately, smart water leak detectors are available to help you catch these problems before they escalate. There are two main types of leak detection systems:  »            Sensor-based systems are affordable and easy to install. They use sensors placed near high-risk areas, like under sinks or next to appliances, and alert you if they detect moisture. Some models offer push notifications to your smartphone, while others make an audible alert.  »            Water main systems are more advanced and can detect changes in water pressure throughout the entire property. If something unusual is detected, these systems can automatically shut off the water supply, preventing further damage. Though more expensive, if you are concerned about things like frozen/burst pipes, these systems are a worthy investment compared to the potential cost of severe water damage. Smart Thermostats For investors with vacant properties or homes undergoing renovation, smart thermostats can be a game changer, especially in colder climates. One of the biggest risks for vacant properties is frozen pipes, which can burst and lead to costly water damage. A smart thermostat allows you to monitor and control the temperature from anywhere, ensuring your property stays warm enough to prevent freezing, even if you cannot be onsite. This way, you do not have to guess whether your home’s heating is holding up in sub-zero temperatures. Plus, you can save on energy costs by adjusting the temperature as needed, rather than keeping it unnecessarily high for extended periods. Smart Sump Pumps Flooding is a major concern for investment properties in high-risk zones. Smart sump pumps and backups can alert you to issues before they cause extensive damage. If your property already has a sump pump, you can upgrade the current setup by installing a smart primary sump pump. These systems can send a text or push notification to your smartphone if high water levels are detected, indicating that the pump has either failed or lost power. This early warning gives you time to take action and prevent the worst-case scenario from occurring. In addition to primary sump pumps, there are two options for smart backup sump pump systems:  »            Smart battery backup systems automatically kick on to handle incoming water if the primary pump fails, is overwhelmed, or loses power. A common issue with older models is that the batteries degrade over time, and you might not know there’s a problem until it’s too late. With smart battery backups, you can monitor the battery’s condition at any time. The battery charge on these systems can last anywhere from a few hours to several days depending on the model and conditions.  »            Smart water-powered backup systems use the main water supply to pump out floodwater in the event of a power outage. For property owners who are concerned about relying on battery life for lengthy periods, these are a great option as they do not require anything but pressure from the water main to operate. However, as these systems rely on the home’s water supply, they can be costly to operate for extended periods. Like battery backups, these are equipped with wireless smart alarm systems that alert you to issues such as pump failure or incoming water. Smart Carbon Monoxide Alarms Carbon monoxide (CO) is a silent killer, and as such, it is important to have a reliable detection system in place to keep occupants safe. Smart CO alarms can detect harmful gas and send real-time alerts to your smartphone, so you will know if there is a problem even if you are not physically present at the property. Some smart alarms can pinpoint the specific area where carbon monoxide is detected and even contact monitoring centers, which can then notify emergency services, if needed. Combination smart home sensors are also available on the market and can detect carbon monoxide, smoke, and fire. Both battery-powered and wired options are available. Smart Locks Whether you manage short-term rentals, vacant properties, or homes under renovation, smart locks are an effective way to keep your property secure. With smart locks, you can monitor access in real time, receive alerts when someone enters or exits, and even remotely lock and unlock doors. There are several types of smart locks on the market:  »            Deadbolt replacements that completely replace your existing lock.  »            Deadbolt adapters that modify part of the existing lock system.  »            Keypad locks, which are simple and allow access with a code. Some models provide backup keyholes in case of battery failure. For vacation homes or rental properties, smart locks can make guest access easier by allowing you to set temporary access codes for visitors such as contractors or cleaners. Just be sure not to reuse codes and deactivate them when necessary. Some smart locks also track who enters and when, providing helpful records in the event of a security incident. Smart Lighting Vacant properties can be a magnet for vandals or burglars. Smart lighting is an easy, low-cost way to make your property look occupied when it is not. By installing smart plugs or bulbs, you can remotely control lights or set schedules for them to turn on and off at random intervals, giving the impression that someone is home. Some systems can be integrated into existing smart home devices while others offer their own applications. In Conclusion While smart home technology provides convenience, it also allows you to take proactive measures to prevent loss and avoid

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Real Estate Meets AI

Productivity Gains and Persistent Limitations by Jonas Bordo In the fall of 2022, OpenAI released ChatGPT and made the power and promise of artificial intelligence (AI) a tangible reality. To date, the impact has been most profound in the area of human productivity. For example, here at Dwellsy, we precisely map every SFR and apartment address that comes into our system (hundreds of thousands per month), and what was once a labor-intensive process is dramatically faster and more accurate with help from AI. Code debugging — one of the most painstaking and unpleasant tasks for our developers — is now (usually) a breeze. Processing emails is dramatically faster with AI reviews and drafts. It is almost as if we have doubled our team size — for only $20 per month per team member in most cases. What AI makes possible with scaled data is nothing short of miraculous. A human can tell in a heartbeat whether or not one single-family home has a garage. But, to look at tens of thousands of them each day and do the same? There is no one human capable of or willing to deliver at that scale, but Large Language Models (LLMs) are happy to take on the task — and they can handle it in minutes and without complaint. LLMs have had a similarly profound impact on our analytical ability. We can feed financial statements into LLMs like ChatGPT, Claude or Gemini and query the financials to get insights in seconds. We can give the LLM an enormous data set and ask for any kind of analysis. They are not always right (like the humans they are built to emulate), but they make an invaluable thought partner in our work. While AI is becoming indispensable, it has serious limitations that are not going away anytime soon. Let’s break them down. Without Good Data, AI is Pointless (or Worse) AI is only as good as the data it uses — the challenge of “garbage in, garbage out” has not changed. Poor-quality data, incomplete datasets, or outdated information can lead to inaccurate predictions and flawed decisions. And SFR is rife with data challenges. Here are some common issues that AI runs into:  »            Offline Properties // In SFR, many properties exist solely offline — rented via a yard sign and managed in someone’s notebook, or an Excel sheet. As a result, AI will miss many reference properties that could be invaluable for analysis.  »            Data Fragmentation // Even when digitized, many owners and operators do so on in-house platforms that are not shared, so much of the data is behind enterprise firewalls and inaccessible to AI.  »            Old Data // SFR evolves rapidly due to factors like new developments, economic shifts, or regulatory changes. Too much data is historical and AI models may rely on old data without factoring in real-time updates.  »            Bias in Data // Data sets used to train AI models are often not statistically significant. These issues can be as simple as dramatically better data being available in one neighborhood or from one provider, causing that data to overwhelm other, potentially more valuable data, in the AI’s analysis.  »            Incomplete Data // I have never yet seen a property that is fully digitized. This is doubly the case for SFR properties, which are small in individual scale and highly varied. At best, the core characteristics are captured in the data, but there is always more missing than present in the digital record. Without extensive, representative, timely, and high-quality data inputs, AI is always going to struggle. So as users of these tools, we need to make sure that we can feed it the right data if we want to be able to depend on the outcomes. Missing Character, Intangibility, and Nuance I was first attracted to real estate by its very “real” character. Unlike most financial assets, real estate is a living, breathing thing with character and life all its own. This fact always hits home when I am touring properties, dating back to one of my first. I still remember that feeling of walking into a decrepit property in the northwest side of Chicago and seeing nothing but potential in the well-aged bones of an unusual property located in an edgy, but up-and-coming neighborhood. That very potential — wrapped up in very human concepts like character — is extremely difficult to digitize and, as a result, remains beyond the reach of AI in this space. Here are some examples of the most challenging gaps in understanding character for AI:  »            Neighborhood Sentiment and Future Growth // AI can analyze current demographic and economic data, but it may struggle to capture the subtle, on-the-ground shifts that can indicate future neighborhood growth. Factors like new businesses, planned infrastructure projects, or changes in community dynamics are much more visible to humans through local knowledge and experience than through data.  »            Property Condition and Renovation Quality // While AI can estimate the value of renovations or upgrades, it cannot fully evaluate the quality of craftsmanship, the durability of materials, or the aesthetic appeal of the property. Human judgment is crucial in evaluating whether improvements will attract residents or increase the property’s long-term value.  »            Local Market Nuances // Some SFR markets have hyper-local characteristics that may not be fully captured by data. For example, two neighborhoods within the same city could have vastly different demand characteristics due to local attractions, schools, or even intangible qualities like “curb appeal.” AI models tend to overlook these nuances, relying instead on broad averages. Over-Reliance on Historical Data AI models often depend heavily on historical data to make predictions about future performance. This reliance can be problematic in several ways:  »            Failure to Account for Disruptions // AI models may not be equipped to predict sudden changes in the real estate market, such as economic downturns, natural disasters, or major regulatory shifts. For example, during the COVID-19 pandemic, could AI models have predicted the spike in demand

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How Climate Risk Financial Modeling Will Change Real Estate Investing

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A Q&A with Toni Moss and Matthew Eby In April of 2024, REI INK was an official publication of the groundbreaking AmeriCatalyst conference, GOING TO EXTREMES: The Extreme Climate, Housing and Finance Leadership Summit. The event brought together the primary constituents in US housing to discuss risks posed by climate change to the housing market. Recent hurricanes Helene and Milton have emphasized the need for astute real estate investors to factor the impact of extreme weather on their investments. These multibillion dollar loss events have brought the vital conversation of insurance, climate migration and declining property values to the forefront. This article features a conversation between Toni Moss, founder and CEO of AmeriCatalyst LLC and Matthew Eby, Founder and CEO of First Street, about the emerging field of climate risk financial modeling (CRFM) and how it will fundamentally change the way real estate investors evaluate the impact of climate change on their investment portfolios. Toni: The historic precedent and ultimate impact of attributing climate risk scores to individual homes cannot be understated. A lot can be read about the science behind the scoring, but I’m interested in knowing about your original idea to do this. Matthew: During my time at The Weather Channel, I observed the difficulty of making climate change real in people’s everyday lives. The conversation often centered around melting ice caps and surface temperature rise rather than its direct impact on individuals and their families. This led to the question: How can we make climate change tangible? For most people, their home is their largest investment. By linking climate change impacts to this major financial and personal asset, we were able make the issue more real and urgent. Thus, eight years ago, we established First Street with the mission of connecting climate change to financial risk. We began by assembling the leading climate scientists in order to develop a set of comprehensive physical climate risk models focused on flood, wildfire, hurricane wind, air quality, and extreme heat. Next, through a collaboration with Arup, a leading environmental engineering firm, we were able to translate climate risk assessments to individual properties in a more tangible way, enabling us to quantify damage due to exposure. We now have property-level climate risk and damage assessments for every property in the US and are expanding internationally. First Street is the leading provider of climate risk financial modeling (CRFM) to governments and major financial institutions, and our climate risk data is featured on all the major real estate platforms: Realtor.com, Zillow, homes.com and Redfin. As a result, nearly every home on the market in the U.S. now includes our climate risk data. We consider this data crucial for everyone from homebuyers to real estate investors to large banks because it allows them all to make climate-informed real estate decisions. Toni: Now that First Street is on all three major real estate platforms (Redfin, Zillow, Realtor.com), what impact do you foresee these scores having on the housing market? Matthew: The integration of climate risk scores into the major real estate listing sites marks a pivotal shift in the housing market, elevating climate awareness to the forefront of real estate decision-making. By offering visible and accessible climate risk data to homebuyers and investors, it empowers them to make informed decisions on property purchases, significantly impacting buyer behavior. Prospective homeowners may now weigh climate-related threats against traditional factors such as price, location, and amenities, leading to a potential reshaping of geographic demand patterns. We have already seen areas identified as high-risk for floods, wildfires, or other climate-related events experience a decrease in property values, while regions deemed as “safer” from climate risk see an appreciation in value as demand increases. Our own research has found that by simply raising awareness around climate risk, there is an associated 3-4% property value decrease for at-risk properties versus those not at risk. Additionally, we have seen systematic changes in search history on sites where this data has been made available, with high risk property searches being followed by persistently lower risk searches. Moreover, as lenders incorporate climate risk scores into their risk assessments, this could lead to changes in mortgage lending practices. Properties in high-risk areas might face higher insurance premiums or stricter lending criteria, complicating the acquisition process. On a broader scale, the housing market will likely witness a recalibration with increased pressure for sustainable development and infrastructure improvements in vulnerable areas. This shift reflects a growing acknowledgment of climate change’s inevitability, urging all stakeholders—from government officials to developers to consider climate in their investing practices. Toni: Which poses a more significant risk from climate change: physical damage to structures or the secondary economic impacts such as insurance costs, property value, local GDP, and climate-related migration? Matthew: When evaluating the risks associated with climate change, real estate investors must consider both direct physical damage to structures and the secondary economic impacts that can arise more indirectly. While physical damage — such as property destruction due to flooding, hurricanes, wildfires, or other extreme weather events — poses an immediate and tangible threat, the secondary economic effects can be equally, if not more significant over the long term. Physical damage to properties can result in substantial repair costs and loss of rental income during downtime. Properties in high-risk areas face increased insurance premiums or even become uninsurable, affecting their overall profitability and marketability of both the property and the local community. Moreover, repeated exposure to climate-related hazards can lead to depreciation of property values, making it difficult to sell or rent them at competitive prices. Most recently, we have seen the first evidence of climate related migration in the US. Specifically, we are not seeing this as large macro migration trends of people fleeing risky areas, like Florida, Louisiana, and California, but instead are using property level climate risk information to identify properties within their desired residential locations. These decisions are being made by homebuyers armed with high-resolution and high-precision climate-risk information and, over time, are going to reshape

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