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Natural disasters don't dissuade home buyers

The risk of natural disaster doesn't seem to dissuade home buyers. In fact, those regions where disasters occur may make them pay even more for their homes.

More than 10 million homes, or 8 percent of all U.S. housing units, are in "very high risk" counties for natural disasters, according to a new report from RealtyTrac, a real estate sales and data website. The report assessed the risk of hurricanes, tornadoes and earthquakes in more than 3,000 county housing markets nationwide. It did not factor in the risk of floods, wildfires or mudslides.

"The potential risk of a natural disaster may not be the first item on most home buyer checklists for a dream home, but prudent buyers will certainly take this into consideration along with myriad other factors that could affect home value," said Daren Blomquist, vice president at RealtyTrac.

A man walks through debris in  Pilger, Nebraska, after a tornado swept across the farming area in northeast Nebraska on June 16, 2014.
Reuters
A man walks through debris in Pilger, Nebraska, after a tornado swept across the farming area in northeast Nebraska on June 16, 2014.

The biggest percentage of homes in the U.S. fall into the "high risk" category for natural disasters, at 47 percent, while 23 percent fall into the "medium" range and 19 percent into the "low risk" category, according to the report. Most of the highest risk counties are in the South, where tornadoes and hurricanes are most prevalent. Some of the biggest high risk states include Alabama, Arkansas, Georgia and Tennessee. Very low risk areas are largely in the upper Midwest.

Of note are the median home prices in some of the higher risk housing markets. In the most populous counties, median home prices are 41 percent higher in high risk areas than the average median price in the rest of the market.

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"The higher median home prices in many counties with a high risk for natural disaster indicates that other location-based factors such as weather and access to jobs override concerns about home damage as a result of earthquakes, tornadoes and hurricanes," Blomquist added.

Most of the high risk counties are on or near the nation's coasts, and homes go for a premium there because of the natural beauty regions that often go hand in hand with natural disaster potential. Beyond the South, markets such as San Diego, the New York metropolitan area (including the Hamptons) and Boston also rank high up in the high risk column.

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Homeowners on the Jersey shore know all too well the cost of living on the coast and what disaster can do to a local market. After superstorm Sandy, which wiped out hundreds of homes, FEMA would not issue flood insurance unless owners rebuilt on high pylons. Banks won't lend there without the insurance, and building on the pylons is very expensive.

"The result has been cash buyers snapping up properties from owners who can't afford to rebuild," said Rick Ambrose, a New Jersey real estate agent.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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