Extreme heat and the shifting landscape of property risk

Transcript:

Allie Barefoot: Welcome back to Data in Context. I'm Allie Barefoot with Cotality. When we think of climate risk exposure in the property market, our minds tend to go to catastrophic, sudden visuals. But there is a silent, creeping peril that is quietly becoming the single leading cause of weather-related fatalities and driving massive financial strain across the country: extreme heat. We are looking beyond just those hot summer days, as Cotality data shows projected spikes in average annual losses up to 700% in areas that have historically been unprepared to handle these conditions. To help us look at this from a real estate and infrastructure perspective, I am putting the data into context today with Cotality's Chief Scientist, Howard Botts. Howard, welcome back to the show.

Welcome back to Data in Context, Howard. So happy to have you here.

Howard Botts: Well, thank you, Allie. Always excited to be on with you.

Allie Barefoot: Of course, and I feel like this is very timely as we are now officially in the start of summer of 2026. And we're going to be talking a little bit about climate risk exposure and heat, so I want to start with the baseline because when people read headlines about record-breaking temperatures, they assume it's business as usual in places in the American Southwest. You know, you think of your Texas, your Arizona—really naturally hot states. But Cotality's data indicates that the threat is moving. Where are these dangerous increases in heat actually taking place?

Howard Botts: Well, you're absolutely right, Allie, that the Southwest continues to lead in extreme heat days. But our models show the fastest acceleration of high heat and extreme heat days is happening in the upper Midwest and the northeastern area. And you know, these northern states, not unlike what Europe and other parts of the country are seeing, have experienced historically relatively cooler temperatures. And uh, often lack the cooling infrastructure. So, uh, at Cotality, we're very acutely aware of infrastructure, what that means, and impacts on particularly these areas.

Allie Barefoot: And this is kind of a massive paradigm shift for the Northeast, Howard. And so, what makes this particularly volatile is that people are actively moving into some of these transitioning areas, right? So, what does the demographic data tell us here about the migration, at least?

Howard Botts: Yeah, you're absolutely right. We're seeing changes we haven't seen in 35 years, with the Midwest and other areas, uh, gaining in population—significant in-migration to Pittsburgh, or you know, Cincinnati, Milwaukee, Chicago, other areas. And this really, shift to places like those are being driven by affordability issues, uh, by relative climate issues, and although we're seeing, you know, increased heat trends in this area relative to the South, they're still better off, even though they will be increasing in heat in time. So, uh, you know, it's an area where people are moving but perhaps aren't aware of future heat risks, and uh, maybe are purchasing homes in which they're really not aware of the need for air conditioning or additional, maybe, retrofitting.

Allie Barefoot: Right. So, a migration strategy to escape the heat could actually land you right in the middle of this shifting risk zone. So, now, even with the Northeast warming rapidly, the traditional heavyweights, they're not losing their titles. You know, we talked about that, Howard. You think of the Texas, you think of the Arizonas. What is happening in the absolute hottest tier of the country?

Howard Botts: Arizona, uh, definitely, uh, continuing to lead in terms of heat. Maricopa County, uh, for instance, uh, uh, our data indicates that heat will spike an estimated 30 to 50% over by 2050. Uh, and major economic hubs, uh, you know, across the region, including Texas, will see, uh, significant increases in heat. And all of that is going to drive, you know, soaring utility costs, grid strain, uh, you know, uh, and a variety of other, uh, additional costs for homeowners.

Allie Barefoot: Let's look past the national averages and look directly at the localized economic impact. When these heat waves settle in, they don't just cause discomfort—they carry a pretty heavy dollar amount as well. Can you kind of break down for us the financial strain at the local level that this causes?

Howard Botts: Yeah, I think that's exactly the right perspective to take, Allie. Uh, you know, these extreme heat is much more than a comfort issue, and uh, is, like you said, creating tremendous economic strain. And at Cotality, we have very granular data where we're looking at individual structures, and we can see it breaking down, uh, extreme heat into certainly a clear, uh, public health vulnerability, uh, uh, but also financial impacts to property and infrastructure. And if we look forward to 2050, uh, we were talking about Arizona a minute ago, they're going to have four of the five hottest counties in the US. Yuma, La Paz, Maricopa, and Pinal counties. So, you know, we've seen a shifting, really, climate baselines with, uh, significantly more heat days. Maricopa County, where Phoenix is, uh, we anticipate a 39% increase in extreme heat days by 2050. Uh, and last year alone, uh, this shouldn't be a surprise it's getting hotter, they had 113 days straight that were over 110 degrees. So all of this has a, uh, substantial human impact. Uh, you know, we're seeing heat-related fatalities, uh, in Arizona at double the rate of Texas, uh, which has, uh, you know, Arizona has one-sixth of the population. And while this is sobering, I think it's a really a call for us to start looking at forward-looking modeling. You know, our cities today are really designed, uh, for the 1950s or 60s. And we're, as you mentioned earlier, a new paradigm of increasing heat, increasing humidity, uh, and all of that, uh, is going to have substantial impact on, uh, as we build forward in the future.

Allie Barefoot: Yeah, you can definitely see in the data that it's moving beyond just the financial sheets and it's really starting to impact health. And I think that, you know, any homeowner, a home is just a building, but your health, your family, that's what really matters here. And you kind of touched on it there, Howard, talking about how we need to continue looking at forward-looking models. So, how do we move from this reactive holding pattern to true climate resilience in the face of extreme heat? What does the data tell property developers, insurers, and local governments to kind of do next to prepare for the next 5, 10 years of this extreme heat coming in?

Howard Botts: Yeah, you've absolutely capitalized on it. And I think what we're talking about here is not to generate fear, but to really talk about what can we do to make, uh, you know, our homes and property and other things more adaptive. Uh, certainly, property builders will need to focus really on resilience, uh, and not building, as we talked about, for today's averages, but for the future. You think of again if we go back to the Midwest and Northeast, uh, many of the homes, uh, don't have air conditioning, and, uh, or substantial, uh, insulation and protection against heat. So, developers will need to start looking at building more resilient, uh, and smarter, uh, communities, but also need for retrofitting. And, uh, a lot of insurers are looking at our, uh, models and saying, "Hey, I've got a senior living facility. What do I need to do? What kinds of remediation can I make to this property?" Certainly, insurers, uh, uh, it has a major impact. We haven't really talked about, uh, ancillary things related to heat, but obviously, wildfire, particularly across, uh, the southern tier of states, and even places like Florida and others we don't think about, are becoming a bigger and bigger issue. And that definitely will continue to drive, uh, insurance costs, uh, both in terms of, uh, direct losses and replacement costs. And then I think local governments need to stop thinking about heat as a liability, but to start thinking about it as a way that they can redevelop the community or mitigate, uh, uh, different aspects. Uh, one of the things that often surprises me, we do a lot of look at local communities, and you can find some areas of the city that are 15, 20 degrees warmer than others. And a lot of that has to do with tree cover, vegetation, uh, park space. And, uh, one of the things we've seen rapidly that I don't think people think a lot about, uh, is things like artificial turf. Uh, we're seeing a number of lawsuits, uh, in various cities across the South where the temperature can be 80 degrees out, but the actual, uh, artificial turf can be 140, 160 degrees. Uh, so, you know, cities need to think about this, uh, certainly, we're seeing a lot of re-emphasis about planting trees, creating more shade, other kinds of things. So, uh, perhaps a long answer to your question, but it really is a, uh, multi-part, uh, thing. We need to have developers thinking about the future, we need to have insurers looking at how they can help homeowners mitigate risk, and we need to have communities building for the future, which will make them much more attractive.

Allie Barefoot: Yeah, I really like what you said about how this data is not to instill fear, but rather help communities prepare for what is coming and get ahead of it while we do still have time, which you gave some great examples of mitigation efforts there. So, thank you so much, Howard, for showing—shedding more light on this for us. On Cotality's insights page, you were a big helping hand in our piece "Feeling the Heat," so that gave us a little bit more numbers on paper, but having your insights is always, always really appreciated, Howard. Thank you so much.

Howard Botts: Thank you, Allie. It's always a pleasure to be on with you.

Allie Barefoot: Thank you again to Howard Botts for joining us here on Data in Context, and thank you so much for listening. If you haven't already, subscribe to Cotality's YouTube channel. And as always, if you want to find out more information, head on over to Cotality.com.