Recovery EFFORTS
What natural disasters and market shifts mean for homebuyers and sellers
In January 2025, Californians witnessed the devastating impact of 14 wildfires that swept through Los Angeles and San Diego Counties. The destruction was widespread and ABC News reported that, by March 2025, the fires had burned 37,000 acres of land and destroyed 16,000 buildings before being contained.
Meanwhile, thousands of miles away, a 7.7 magnitude earthquake struck Southeast Asia that same month, centered just six miles from the city of Sagaing in Myanmar. In early April 2025, a spokesman for the ruling military government said at least 3,649 people had been killed. The earthquake also affected neighboring countries, including Thailand, Laos, Bangladesh, India and China.
Both disasters served as stark reminders of nature’s capacity to transform communities and reshape landscapes in a matter of days. From hurricanes and wildfires to floods and earthquakes, natural disasters are not only deadly, but they also exert a huge financial toll. In a year defined by climate volatility, 2024 saw global natural catastrophes cause an estimated US$320 billion in economic losses, with insured losses reaching between US$135 billion and US$140 billion, according to analysis published in January 2025 by the insurance companies Munich Re and Swiss Re. These figures mark a stark departure from historic norms, significantly exceeding the inflation-adjusted insured loss averages of the past decade—and even the past 30 years.
According to a January 2025 report by Moody’s, 2024 was the fifth consecutive year in which insured global losses from natural disasters surpassed US$100 billion, pointing to a sustained period of climatic disruption. The majority of the losses were weather-related, driven by powerful natural events including tropical cyclones, severe storms and flooding. Notably, nearly a third of the insured losses were attributed to major hurricanes making landfall in the U.S.
This hillside residence in Malibu, California, set above Malibu Pier, has views of the Pacific Ocean and scenic mountains.
Sotheby’s International Realty - Malibu Brokerage
“ THE NUMBER OF DAMAGING NATURAL DISASTERS IS GROWING… REINFORCING THE INCREASING IMPORTANCE OF CONSIDERING CLIMATE RESILIENCE WHEN INVESTING IN LUXURY REAL ESTATE
”
Billion-dollar natural disasters
Source: NOAA www.ncei.noaa.gov/access/billions
Losses from natural disasters
Source: Munich Re and Swiss Re
The number of such damaging natural disasters is growing. According to data released in January 2025 by the National Centers for Environmental Information, part of the National Oceanic and Atmospheric Administration, in 2024, the U.S. alone suffered 27 natural disasters where the estimated damage exceeded US$1 billion. This trend is having profound consequences for high-end property markets around the world, reinforcing the increasing importance of considering climate resilience when investing in luxury real estate.
The recovery period after a disaster can also affect the real estate market, as homeowners navigate insurance claims, changes to zoning laws and the emotional and financial costs of rebuilding or relocating. According to a May 2025 report from Bank of America Institute, 23% of U.S. homeowners have experienced property damage or loss in the past five years due to severe weather and 65% are preparing their homes to withstand future events.
Homeowners affected by natural disasters typically have three main options: rebuilding their property to its original specifications, reconstructing with enhanced climate resilience or moving to a new location.
Each option impacts housing inventory and luxury home prices differently—rebuilding or upgrading slows the return of homes to the market, limiting supply and potentially driving up prices, while relocation can shift demand to new areas, putting upward pressure on prices in less-affected, high-demand regions. These dynamics can create localized surges or shortages in luxury real estate inventory, depending on the pace and scale of recovery. We have outlined the specific concerns and opportunities related to each option overleaf.
1. Restoring a property to its original state
Rebuilding to spec—restoring a home to its pre-disaster condition—allows homeowners to regain some semblance of normality. It is also often the most straightforward option, provided that any insurance payout is sufficient to cover the construction costs and local regulations allow for it.
According to the 2025 Mid-Year Sotheby’s International Realty agent survey, 46% of respondents said the top concern of clients who lived in areas that had experienced weather-related damage was rebuilding their home to its original state. This was followed closely by rebuilding to a more damage-resistant standard (21%).
“Many people are looking to build exactly as before,” says Joe Cilic, global real estate advisor, Sotheby’s International Realty - Pacific Palisades Brokerage, although some leeway is being allowed because many homeowners lost houses that were built decades ago. “Following the wildfires, building regulations have been relaxed so people can build homes 10% bigger than what they had or to the current building code, whichever is greater.
Prices of homes and land in the area have also been affected by the fires. “The average sales price for a single family home in the Pacific Palisades was US$4.6 million in 2024, and it is the same in 2025. However, there have not been many sales of surviving homes since the fire—only 11 as of April 2025. Interestingly, the average list price currently for surviving homes is US$9.7 million, which is a significant jump from historical norms. However, this is due to low inventory in the fire-impacted areas and a more typical inventory in the priciest area of the Palisades, the Riviera, which was largely unaffected by the fires,” Cilic adds. “Prior to the fire, we did not have many vacant land sales, and now we do, with current asking prices ranging from US$750,000 to US$8.25 million, and an average sale price of US$2.8 million. In comparing this to pre-fire values of properties that were torn down to build, for example land value sales, we have seen prices of land discounted between 20% and 35% compared to pre-fire sales.”
The new land sales align with estimated historic land values based on a rule of thumb that a plot of land in Los Angeles is worth between 40% and 60% of a property’s overall value. This calculation has historically been used to estimate land values even when few vacant parcels were available for sale. Selma Hepp, chief economist for Cotality, told HousingWire in March 2025 that the cost of land in Los Angeles has already increased at triple the pace since the onset of the pandemic, while home prices have gone up about 50%.
While rebuilding efforts continue, the process is still evolving, and many homeowners are working through the complexities of both regulatory adjustments and the shifting real estate market. “Thus far, only approximately 4% of the homes damaged or destroyed in the Palisades Fire have come to market, as of May 2025,” Cilic says. “We expect that number to increase over the next couple of years to between 10% and 15%, but the vast majority of owners intend to rebuild, and many projects are already underway, with plans submitted for approval.”
However, rebuilding to spec is not always feasible. Updated building codes introduced by local or national governments after a disaster might require alterations to a home that increase the cost of rebuilding beyond what the insurance payout will cover. A February 2025 study by First Street, a company that models the financial risks caused by climate change, found that by 2055, climate-driven events will increase homeowner insurance premiums by an average of 29.4% nationwide and could result in the destruction of US$1.47 trillion in real estate.
In regions prone to flooding, such as parts of Florida, new regulations may mandate elevated foundations to reduce the risk of future damage. According to the Federal Emergency Management Agency (FEMA), just one inch of floodwater can cause up to US$25,000 in damage. Navigating these evolving building codes requires homeowners to balance their desire for a similar home with the reality of new regulations. While some may feel that rebuilding to spec offers a sense of closure, it’s crucial to weigh the financial feasibility against any regulatory challenges.
Homeowners’ top concern post-disaster
Source: 2025 Mid-Year Sotheby’s International Realty agent survey
2. Incorporating resilience and disaster-proofing
A natural disaster can give property owners the opportunity to enhance their home’s resilience, and many are opting to do just that. For example, in wildfire-prone areas they might install ember-resistant vents in the roof and create landscaping with open spaces free of any combustible plants to act as a firebreak. In regions prone to storms and ocean surges, upgrades such as hurricane-rated windows, structural reinforcement and improved drainage systems are possible options.
After the fires in California, it became apparent that many of the surviving houses incorporated some fire-preservation features, according to a January 2025 report by the Los Angeles Times. “Some houses were better suited to handle wildfires, so there will be a push to incorporate more resilience when rebuilding,” Cilic says. This will also be the case for people looking to move to the affected areas and build new homes.
This market shift is evident in the Pacific Palisades neighborhood, where despite an estimated US$22 billion in real estate losses, according to a February 2025 report in the Los Angeles Times, many have retained their value. According to data on the Pacific Palisades housing market trends by Realtor.com®, the median listing home price in the Pacific Palisades neighborhood was US$6.2 million in March 2025, an 11.3% increase on the year before. Similarly, although Altadena saw a loss of over US$7.8 billion in property value, this has not led to a market collapse. The median list price in Altadena in March 2025 was US$1.2 million, according to Realtor.com®, about in line with its US$1.26 million median list price one year ago.
Naples, Florida, is a popular luxury real estate market with high-end properties such as this five bedroom residence.
Premier Sotheby’s International Realty
“People who felt they were priced out of Pacific Palisades are now entering the market,” Cilic says. “The consensus is that the neighborhood will be even more desirable after the rebuild because everything will be new. People feel like it’s going to be an even higher-end luxury property market.”
In fact, the post-disaster market is experiencing increased interest, particularly where there are opportunities for rebuilding or new construction. An April 2025 report by The Wall Street Journal supports this and found that wealthy individuals continue to move to locations that are at risk of climate events and are “setting home-price records when they get there.” Indeed, despite recent storms, two cities along Florida’s west coast, Naples and Tampa, were identified by advisor Henley & Partners as “future wealth hotspots” in its USA Wealth Report 2024.
One of the key advantages of rebuilding with disaster-resistant features is the potential for long-term financial benefits. Homes built to withstand future disasters attract reduced insurance premiums and offer greater long-term value and peace of mind for their owners. Moreover, many municipalities now mandate better safety measures as part of the rebuilding process.
The financial toll of the Los Angeles wildfires
US$22 billion in real estate lost in Pacific Palisades US$7.8 billion in real estate lost in Altadena
Source: Los Angeles Times
This trend is particularly evident in coastal regions, where modern construction standards are playing an increasingly significant role in shaping real estate markets. “The contrast between older and newer homes in coastal markets has never been more apparent,” says Budge Huskey, CEO, Premier Sotheby’s International Realty, which has offices in Florida and North Carolina.
“In some cases a beachfront home may sustain catastrophic damage, while a neighboring structure built under more stringent regulations remains virtually untouched. Florida’s 50% rule underscores this dynamic, requiring that any home sustaining damage exceeding 50% of the value of improvements is rebuilt or replaced to meet current codes. While this may seem rigid, it ensures the continued enhancement of coastal infrastructure, fostering a market where builders and buyers alike can seize the opportunity to create resilient residences.”
The recent impact of Hurricane Helene was less predictable for homeowners in North Carolina. For example, Biltmore Forest, among the most desirable upscale residential communities in Asheville, is estimated to have lost 100,000 trees, but only 35 homes were damaged.
Selling for nearly US$16 million in 2024, this Banner Elk home set a record for most expensive home sold in North Carolina.
Premier Sotheby’s International Realty
“The event led to widely disparate outcomes, with some small villages along rivers destroyed while other areas primarily suffered tree damage,” says Huskey. “Asheville experienced terrible destruction in some areas from the flooded river, but other places saw limited or no damage whatsoever to structures.” The resilience in this case applies to the area’s market overall, rather than individual properties. “Closings were delayed, yet most pending transactions moved forward. Most of the properties that were damaged were repaired and returned to the market, with the exception of the most highly impacted areas. While the evidence of Helene remains significant to this day, months after the event, the vast majority of homes on the market are undamaged.”
Additionally, a pattern of market recovery emerged immediately following the hurricane. According to an October 2024 report by HousingWire, new home listings in the Asheville, North Carolina metropolitan area “snapped back sharply” closer to normal levels in the week following Hurricane Helene, with sources reporting that “out-of-town investors were among the most interested buyers.”
Coastal markets worldwide have also implemented measures to mitigate the impact of natural disasters and ensure long-term stability. “Phuket and Koh Samui in Thailand have been affected by major storms over the years, although properties there haven’t suffered as badly as those battered by the hurricanes in the U.S.,” says Felix Desjardins, global real estate advisor at List Sotheby’s International Realty, Thailand.
“A particularly catastrophic disaster was the 2004 Indian Ocean tsunami, which severely damaged large parts of the western coast of Phuket. That area is thriving at the moment and is the most in-demand. The government has tsunami alarm systems in place and established safe evacuation routes. Although a tsunami of that strength is probably a once-in-a-lifetime event, some buyers are avoiding the beachfront and opting for hillside locations just in case.”
This cautious approach by buyers mirrors a broader global trend, where both regulatory improvements and shifting buyer priorities are shaping the future of luxury real estate in disaster-prone regions. “Over the years, two key trends have emerged in response to natural events,” Huskey says. “First, municipal building codes for new construction continue to evolve, reinforcing homes against severe storms through elevated structural requirements. Second, buyers are becoming increasingly selective, evaluating properties not only for their lifestyle appeal but also for their long-term investment viability based on perceived risk.”
3. Moving to a new area
For some homeowners, the emotional and financial burden of rebuilding after a disaster—paired with the uncertainty of future events—leads them to consider relocating. In many cases moving just a short distance can provide a safer living environment, while maintaining proximity to familiar surroundings. “We see many people moving away from the coast—but not too far away,” says Melinda Gunther, global real estate advisor, Premier Sotheby’s International Realty in Naples, Florida. “Beachfront people are happy to look two or three miles inland.”
This shift in behavior has a direct impact on real estate markets and underscores the growing influence of climate change on where and how people choose to live, with some regions already seeing shifts in buyer preferences and housing demand.
“While North Carolina’s real estate market has yet to experience significant shifts due to recent storm activity, Florida’s coastal regions are seeing nuanced changes in buyer behavior,” Huskey says. “The impact of storm surges caused by recent hurricanes has prompted some long-term residents to consider transitioning to country club communities or luxury condominiums, prioritizing the convenience of a ‘lock-and-leave’ lifestyle with reduced property maintenance.”
In other countries, regions susceptible to natural disasters may differ from prime luxury real estate locations, as in Japan, where major earthquakes hit the southern island of Kyushu in 2024 and 2025. “In the Tokyo metropolitan area, our main target area, we have not seen any price hikes or declines due to natural disasters,” says Kantaro Aoki, global real estate advisor, List Sotheby’s International Realty, Japan. “This may be due to the fact that the area was not near the epicenter of the recent earthquakes.”
Interestingly, relocation can also create new opportunities. When homeowners leave disaster-prone areas, their homes become available to newcomers—sometimes making these regions more desirable in the long run. “In the weeks following Hurricane Helene, our advisors in North Carolina facilitated two record-breaking sales—setting new price benchmarks for the entire state,” Huskey says.
Two cities along Florida’s west coast, Naples and Tampa, were identified by advisor Henley & Partners as “future wealth hotspots” in its USA Wealth Report 2024.
Premier Sotheby’s International Realty
One of these sales—a 5,200-square-foot four-bedroom home on five acres in Linville, North Carolina, that only had generator power following the storm—closed for an impressive US$14 million. “As expected, market activity temporarily softened in the immediate aftermath as buyers and sellers reassessed conditions, but the resilience of the luxury sector remains evident, driven by a long-term vision and confidence in these coveted markets.”
By adapting to evolving risk factors and shifting preferences, both buyers and sellers are playing a role in shaping the future of real estate in disaster-prone areas.
A changing landscape
As climate-driven events become more common, real estate markets are responding with a mix of resilience, regulation and strategic decision-making. In high-impact areas including Pacific Palisades and Altadena, property values remain strong despite significant losses, as many homeowners choose to rebuild with enhanced disaster-resistant features, often encouraged by more flexible building codes. Meanwhile, others are opting to relocate, fueling demand in adjacent, less-affected areas and reshaping buyer behavior.
For sellers, this means a potentially competitive market if they stay and rebuild with modern safety standards, increasing long-term property appeal. For buyers, the current climate presents opportunities to enter previously inaccessible luxury property markets—though often with a higher emphasis on insurance, structural resilience and risk mitigation. Ultimately, whether staying or moving, homeowners must weigh lifestyle preferences against evolving risks and the economic realities of climate change.
“ THE NEIGHBORHOOD WILL BE EVEN MORE DESIRABLE AFTER THE REBUILD BECAUSE EVERYTHING WILL BE NEW
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Joe Cilic, global real estate advisor, Sotheby’s International Realty - Pacific Palisades Brokerage
The economic impact of climate catastrophe
Source: First Street
Increase in U.S. homeowner insurance premiums by 2055
Bespoke insurance
Safeguarding wealth with specialized coverage
Insurance policies to cover the possessions and property of the wealthy are far from one-size-fits-all. Their assets may encompass everything from multi-million-dollar estates to rare cars, wine cellars, yachts and priceless collections of fine art, so high-net-worth individuals (HNWIs) frequently turn to specialist insurance professionals and companies.
“When advising clients on protecting their property, the first step is ensuring they have a robust insurance policy tailored to its value and unique features, including coverage for high-end finishes, smart home technology and additional structures such as guest houses or pools,” says Chase Mizell, global real estate advisor, Atlanta Fine Homes Sotheby’s International Realty. “I also recommend consulting a risk management specialist to explore excess liability coverage and flood insurance, even if their property is not in a flood zone.”
For luxury homeowners, rebuilding a home following a disaster can be complicated. Many HNWIs invest heavily in bespoke architecture, custom finishes and rare materials that can be hard to source or replicate. Luxury homes also often come with bespoke features such as extensive landscaping, indoor swimming pools and advanced home technology, all of which can significantly increase the rebuilding cost.
Traditional home insurance policies, such as the state-sponsored California Fair Access to Insurance Requirements (FAIR) Plan, which has a maximum coverage of US$3 million, may not adequately cover these assets. Luxury homeowners may need policies that account for the cost of rebuilding with higher-quality materials and design services.
One of 18 luxurious apartments with views of the charming Fasanenstraße in Berlin.
Berlin Sotheby’s International Realty
One important option is a guaranteed or extended replacement cost policy. “Guaranteed replacement cost provides more coverage than standard replacement cost,” says Carolyn Boris, vice president and product development manager, personal risk services, for insurance company Chubb. “In general, guaranteed replacement cost means the insurer will repair, replace or rebuild damaged property to the same or similar design, using materials and workmanship of comparable quality. Depending on the insurer and the state where the property is located, the cost to repair, replace or rebuild may exceed the amount stated in a standard replacement cost policy.” It can even cover an unlimited amount or a specified percentage over the policy amount, Boris adds.
While policies like these come at a premium, they offer valuable peace of mind. Guaranteed replacement cost coverage ensures that the homeowner won’t be left to cover the difference should rebuilding costs exceed the policy’s limit. “All insurers that specialize in insuring high-value homes offer some form of guaranteed replacement cost coverage, though they may have different names for it, such as extended or enhanced replacement cost coverage,” says Boris.
Items such as fine art, rare antiques, designer clothing, high-end jewelry and luxury watches are just some of the objects that can be damaged when a home is destroyed. Standard insurance policies often fail to account for the true value of such items, which is where specialized policies come into play. Any valuable item should be appraised by an expert to determine its current market value. Once the value is agreed upon, a specialized insurance policy can be created to ensure the asset is sufficiently protected.
“We recommend that collectors update any appraisals on a regular basis to ensure items are insured in line with the market,” says Laura Doyle, senior vice president of fine art and valuable collections product manager at Chubb. “For most valuable objects, the recommended time frame for reappraisal is every three to five years. In more dynamic markets, such as post-war and contemporary art, we recommend reviewing values every one to three years. Insurance schedules should be updated with the most current values. Appraisal fees should be based on an hourly rate and never tied to the value of an item.”
Wealthy individuals often hold their property in trusts to preserve wealth through generations and to mitigate tax liabilities. However, when it comes to insurance, the structure of the property ownership can add an extra layer of complexity. A common mistake among HNWIs is neglecting to have the trust named as the owner on the insurance policy. This oversight can create potential legal and financial problems if something were to happen to the property.
“Holding a residence in a trust offers privacy, estate planning benefits and asset protection,” Mizell says. “It allows the owner to control how the property is managed and transferred, while avoiding probate and potentially reducing estate tax exposure. It is critical that the trust is correctly listed as the owner on the insurance policy. Many insurers require additional endorsements or specific language in the policy to ensure proper coverage. Clients should work closely with their estate attorney and insurance provider to structure the trust appropriately and avoid coverage gaps.”
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