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Are drought and wildfire partly to blame for falling real estate prices in the Western U.S.? It's complicated, experts say.
The American West is a hot and increasingly dry place — afflicted by drought, wildfires, and a declining Colorado River basin that is struggling to meet the demands of the millions of thirsty people who live in the region.
Also: It’s not a great time to sell a house there.
The Wall Street Journalreports that in America’s 12 major housing markets west of Texas — places like Salt Lake City, Las Vegas, and Seattle, and every place in between — home prices were lower in January than a year before. That’s a sharp contrast to housing prices just about everywhere else in the country, where they’re going up.
What’s going on? WSJ cites the end of the tech boom. Companies like Facebook, Amazon, and Google have laid off thousands of workers this year, hitting cities like San Francisco and San Jose, California exceptionally hard: Both cities saw 10-percent-plus drops in home prices. Climate was mentioned nowhere in the Journal’s story.
If you’ve been paying attention to the climate crisis in America, though, you might notice something interesting about the newspaper’s map showing the major cities where home prices are falling: It doesn’t look terribly different from the U.S. Drought Monitor map showing that much of the country west of the Mississippi River is laboring under the effects of a long-running drought — a drought that, at the very least, has been exacerbated greatly by the effects of climate change.
So that’s correlation. Is there causation?
Or to put it another way: Is climate change denting home prices in places like Washington, Oregon, and California? And if not now, what might a warming West mean for home prices in the future? The West is already hot and dry. Will people want to buy houses there if it becomes hotter and dryer?
The answer, as with many things climate-related: It’s complicated.
“What's really driving this now is just everything got, I think, too overheated during COVID and prices are just sort of coming back to what should have been their equilibrium,” says UNLV’s Nicholas Irwin, an expert on urban and environmental issues. (He means the market was “overheated,” not the environment.) But he allows that worries about current and future heat waves and droughts could be one factor — among many — that influence the interplay between buyers and sellers when a home is changing hands. “All that is kind of embedded in that bidding process that homebuyers make when they decide to buy a house.”
What seems clear is that Western homeowners are challenged by the warming environment. A lot of media attention about climate change and real estate has focused on coastal properties, where communities struggle with protecting — or even moving — beachfront properties that find themselves in the path of rising oceans. One recent study found that American homes are overvalued by as much as $237 billion due to unacknowledged flood risks due to climate factors.
But the drought is also taking its toll on current and prospective homeowners who live a long way from the oceans and rivers.
The 2020 California wildfires destroyed more than 11,000 structures in the state, turning residents into de facto climate refugees and putting renewed strains on the Golden State’s insurance industry. In places like Arizona, drought and climate change are putting pressure on builders who are having difficulty finding enough water to supply the giant new housing developments they want to put up in the desert.
And that struggle is pitting neighboring communities against each other: In January, the city of Scottsdale, Arizona shut off water sales to homes in the unincorporated community of Rio Verde Foothills, leaving residents there to eat off paper plates and use rainwater to flush their toilets. (They sued Scottsdale.) As long as that situation persists, those homes will be difficult to sell for anything like the investment the current owners put into them.
These developments have gotten the notice of the real estate industry. A 2013 study estimated that a decline in Colorado River flows could cut riverfront real estate prices by nearly 10 percent in coming decades. In October, a survey by the Redfin real estate brokerage found that 62 percent of Americans who plan to buy or sell a home — and nearly three-quarters of Gen Z respondents — were reluctant to move to places with rising temperatures and encroaching sea levels.
The industry’s responses, though, have been uneven. The Sierra Club in March pointed out that “some real estate companies like Redfin and Realtor.com offer information about a property's climate-related disaster risk; others, like Zillow, don't.”
Despite the recent home price drop, there is evidence that Americans are still eager to move to the West — even when the climate risks are plain.
In 2021, for example, the “Marshall fire” in Boulder County, Colorado, killed two people and destroyed nearly 1,000 homes and businesses. But "the fact that hundreds of homes burned down hasn't reduced demand,” says Ethan Shapiro, founder of Boulder’s Climate Change Realty. (The company directs half its commissions to the environmental cause of the client’s choice.) While there’s “flickering” awareness of a threat, he says, "I haven't spoken to anybody who is spooked to the point they wouldn’t want to live in Boulder."
The West is complicated because it has an unusually volatile real estate landscape to begin with, says Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School of Business. “A large share of land in the West is actually outside of development due to national parks, tribal lands, et cetera,” she says. In good times, Western housing prices go up faster than the rest of the country. In the bad times — right now — they go down much faster, too.
Climate change is just one more factor affecting that volatility.
While it’s hard to estimate just how big a factor it is right now, says UNLV’s Irwin, it may become more apparent in the near future as homeowners start to understand the risks of wildfires — and as mortgage lenders get skittish about making loans for houses that have a tough time getting insurance for such disasters.
“You could buy a house in cash if you want, but you wouldn't be able to get a mortgage in an area without homeowners insurance and then that's going to shift some people away,” he says. “And maybe that's probably a good thing if we get fewer people living in these areas, because it's very expensive to fight wildfires.”
If you’re a homeseller, though, that might not be so good. For the real estate industry in the West, climate change just might end up having a cooling effect.
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The Loan Programs Office is good for more than just nuclear funding.
That China has a whip hand over the rare earths mining and refining industry is one of the few things Washington can agree on.
That’s why Alex Jacquez, who worked on industrial policy for Joe Biden’s National Economic Council, found it “astounding”when he read in the Washington Post this week that the White House was trying to figure out on the fly what to do about China restricting exports of rare earth metals in response to President Trump’s massive tariffs on the country’s imports.
Rare earth metals have a wide variety of applications, including for magnets in medical technology, defense, and energy productssuch as wind turbines and electric motors.
Jacquez told me there has been “years of work, including by the first Trump administration, that has pointed to this exact case as the worst-case scenario that could happen in an escalation with China.” It stands to reason, then, that experienced policymakers in the Trump administration might have been mindful of forestalling this when developing their tariff plan. But apparently not.
“The lines of attack here are numerous,” Jacquez said. “The fact that the National Economic Council and others are apparently just thinking about this for the first time is pretty shocking.”
And that’s not the only thing the Trump administration is doing that could hamper American access to rare earths and critical minerals.
Though China still effectively controls the global pipeline for most critical minerals (a broader category that includes rare earths as well as more commonly known metals and minerals such as lithium and cobalt), the U.S. has been at work for at least the past five years developing its own domestic supply chain. Much of that work has fallen to the Department of Energy, whose Loan Programs Office has funded mining and processing facilities, and whose Office of Manufacturing and Energy Supply Chains hasfunded and overseen demonstration projects for rare earths and critical minerals mining and refining.
The LPO is in line for dramatic cuts, as Heatmap has reported. So, too, are other departments working on rare earths, including the Office of Manufacturing and Energy Supply Chains. In its zeal to slash the federal government, the Trump administration may have to start from scratch in its efforts to build up a rare earths supply chain.
The Department of Energy did not reply to a request for comment.
This vulnerability to China has been well known in Washington for years, including by the first Trump administration.
“Our dependence on one country, the People's Republic of China (China), for multiple critical minerals is particularly concerning,” then-President Trump said in a 2020 executive order declaring a “national emergency” to deal with “our Nation's undue reliance on critical minerals.” At around the same time, the Loan Programs Office issued guidance “stating a preference for projects related to critical mineral” for applicants for the office’s funding, noting that “80 percent of its rare earth elements directly from China.” Using the Defense Production Act, the Trump administration also issued a grant to the company operating America's sole rare earth mine, MP Materials, to help fund a processing facility at the site of its California mine.
The Biden administration’s work on rare earths and critical minerals was almost entirely consistent with its predecessor’s, just at a greater scale and more focused on energy. About a month after taking office, President Bidenissued an executive order calling for, among other things, a Defense Department report “identifying risks in the supply chain for critical minerals and other identified strategic materials, including rare earth elements.”
Then as part of the Inflation Reduction Act in 2022, the Biden administration increased funding for LPO, which supported a number of critical minerals projects. It also funneled more money into MP Materials — including a $35 million contract from the Department of Defense in 2022 for the California project. In 2024, it awarded the company a competitive tax credit worth $58.5 million to help finance construction of its neodymium-iron-boron magnet factory in Texas. That facilitybegan commercial operation earlier this year.
The finished magnets will be bought by General Motors for its electric vehicles. But even operating at full capacity, it won’t be able to do much to replace China’s production. The MP Metals facility is projected to produce 1,000 tons of the magnets per year.China produced 138,000 tons of NdFeB magnets in 2018.
The Trump administration is not averse to direct financial support for mining and minerals projects, but they seem to want to do it a different way. Secretary of the Interior Doug Burgum has proposed using a sovereign wealth fund to invest in critical mineral mines. There is one big problem with that plan, however: the U.S. doesn’t have one (for the moment, at least).
“LPO can invest in mining projects now,” Jacquez told me. “Cutting 60% of their staff and the experts who work on this is not going to give certainty to the business community if they’re looking to invest in a mine that needs some government backstop.”
And while the fate of the Inflation Reduction Act remains very much in doubt, the subsidies it provided for electric vehicles, solar, and wind, along with domestic content requirements have been a major source of demand for critical minerals mining and refining projects in the United States.
“It’s not something we’re going to solve overnight,” Jacquez said. “But in the midst of a maximalist trade with China, it is something we will have to deal with on an overnight basis, unless and until there’s some kind of de-escalation or agreement.”
A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.