A growing wave of climate-related disasters is pushing more American homeowners into financial jeopardy, raising the specter of widespread home repossessions and mortgage losses. According to a new report from First Street Foundation, a risk analysis organization, worsening environmental conditions are projected to cause up to $1.2 billion in mortgage-related credit losses this year alone, impacting an estimated 19,000 properties across the United States.
The report underscores how rising global temperatures and increasingly severe weather events—such as floods, wildfires, and hurricanes—are driving up insurance premiums, damaging properties, and eroding home values. As a result, many homeowners in high-risk areas are struggling to meet mortgage payments, with some facing the possibility of foreclosure as insurers either drastically raise rates or exit certain markets altogether.
Uninsured damage, particularly from floods, is among the most significant financial threats. While federal flood insurance is available through the National Flood Insurance Program (NFIP), coverage gaps remain, especially in areas not officially designated as flood zones but increasingly prone to inundation due to shifting climate patterns. Without adequate insurance, homeowners must absorb repair costs themselves—often forcing them into debt or default.
“The real estate market is facing a reckoning,” said Dr. Jeremy Porter, head of climate implications research at First Street. “We’re now seeing how climate risk isn’t just an environmental issue—it’s a financial and economic one that affects homeowners, lenders, and entire communities.”
The report identifies states like Florida, California, Louisiana, and Texas as particularly vulnerable due to their exposure to hurricanes, wildfires, and coastal erosion. In Florida, for instance, private insurers have been pulling out of the market or raising premiums by double digits, making it difficult for residents to afford coverage. This has led to a spike in policyholders relying on Citizens Property Insurance Corporation, the state’s insurer of last resort, which is itself under financial strain.
These rising costs are not just affecting homeowners—they’re also placing mortgage lenders at greater risk. As insurance premiums rise and property values fall, the loan-to-value ratios of homes increase, weakening collateral for lenders. In cases of default, the ability of banks to recoup losses through property sales is diminished, especially in communities where climate threats are depressing real estate markets.
Analysts warn that without meaningful intervention, these trends could ripple through the broader economy. The potential for billions in credit losses over the next decade raises concerns about housing market stability and the possibility of localized housing crises in climate-vulnerable regions.
In response, some lenders are beginning to reassess how they evaluate risk, with climate exposure increasingly factored into mortgage approvals and underwriting decisions. However, consumer advocacy groups caution that this could lead to redlining or the denial of loans in already marginalized areas, further deepening economic disparities.
“This crisis highlights the urgent need for national policy solutions that address both climate adaptation and housing resilience,” said Maria Torres-Springer, a housing policy expert and former New York City deputy mayor for housing. “We need robust investments in infrastructure, updated flood maps, and subsidies for affordable insurance to help communities weather these changes.”
Federal agencies such as the Federal Emergency Management Agency (FEMA) and the Department of Housing and Urban Development (HUD) are under increasing pressure to play a more active role. Proposals include expanding federal insurance programs, incentivizing climate-resilient construction, and providing grants to help homeowners retrofit vulnerable properties.
Meanwhile, homeowners across the country are confronting tough choices. In many cases, they must decide whether to stay and invest in costly repairs or relocate to less risky areas—a decision often complicated by personal, financial, and cultural ties to their communities.
As the climate crisis accelerates, experts agree that the intersection of environmental vulnerability and financial instability is emerging as one of the defining challenges of the next decade. The First Street report serves as a stark warning: without swift and coordinated action, climate-related home repossessions could become the next major economic shock facing the United States.
