The U.S. housing market, valued at over $55 trillion1, is a cornerstone of the American economy. For decades, access to affordable mortgages and the path to homeownership has driven wealth creation and upward mobility for millions of low- and middle-income American households. Today, however, this critical sector of the economy faces growing pressure from climate-related risks and costs.

Recent ICE Climate research has demonstrated that the total cost of housing has increased significantly over the last decade, due not only to rising insurance costs but also property taxes and utility bills — all of which are influenced by climate-related factors.

This report goes further, presenting evidence of the direct impacts of climate-related hazards (tropical storms/hurricanes, wildfires, and floods) and long-term physical climate risks on mortgage performance and home values. Mortgage performance can often signal early stress in local housing markets,2 while home price trends tend to reflect longer-term structural and socioeconomic shifts.3 Together, these two indicators provide distinct perspectives on how climate risk is impacting the U.S. housing and mortgage markets across different timescales and regions.

Increases in delinquency rates after extreme weather events reflect immediate financial stress on homeowners due to factors such as property damage, displacement, and disruptions in income. About 40,000 homeowners in areas affected by Hurricanes Helene and Milton became delinquent on their loans in the months following the hurricanes. Wildfires often have similar impacts: more than one-fifth of borrowers within the 2025 Eaton and Palisades wildfires in California fell behind on their mortgage payments the month following the fires.

On average, these impacts appear to be significant but temporary, with delinquency rates falling back within the range of baseline (pre-event) rates within 12 months after the event.

The analysis suggests that high flood and hurricane risks are associated with an increase in severe delinquency probability. On average, loans in our sample with an ICE Hurricane Score of 5 have a severe delinquency probability that is roughly 80% higher than that of an average loan with negligible hurricane risk.

Similarly, loans associated with homes with high flood risk have a ~40% higher probability of severe delinquency, compared to loans with lower flood risk. Interestingly, the trend is less steep when the model is run across a loan sample subset with flood insurance coverage. At the outset, the direction of this effect was not obvious. A reasonable assumption might have been that flood insurance could increase delinquency rates because of the added financial burden of premium payments. Instead, the analysis suggests, on average, the protective benefits of flood insurance may outweigh its affordability burden.

On average, the compound annual growth rate (CAGR) of ICE’s Home Price Index is ~0.2% to 0.4% slower in high-flood-risk zip codes, after accounting for a suite of different socioeconomic factors. We estimate that from 2013 to 2024, ~$31 billion of total residential real estate value in the U.S. may have been lost due to this flood risk, compared to a counterfactual “zero flood risk” world.

Put another way, this implies that if two homes both had a value of $250,000 in 2013, by 2024:

In a decade of strong housing appreciation, this kind of average discount has been masked by overall market growth and low mortgage rates. But signs of a softening housing market are emerging — especially in metropolitan areas and markets with high climate exposure. If these trends continue, this apparent “flood risk penalty” could translate into higher mortgage default rates, potentially impacting residential mortgage-backed securities (RMBS) and broader financial markets.

Going forward, ICE Climate’s ability to forecast increasing probability of delinquency in the aftermath of extreme weather events could enable a series of important and novel applications, including:

Beyond these specifics, the link between extreme weather events and delinquency rate increases makes one thing clear: investors should consider integrating event-based delinquency modeling into their risk assessment frameworks.