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Housing markets are undergoing a fundamental shift with high mortgage rates and global central banks raising interest rates to fuel inflation. Against this backdrop, some — including ‘Big Short’ investors — fear that the real estate sector is facing a systemic problem: flood risk.

One ‘Big Short’ investor fears the often-overlooked climate risk story could repeat itself in the housing market.

Dave Burt, CEO of investment research firm DeltaTerra Capital, was one of the few skeptics who realized that the real estate sector was on the brink of collapse in 2007.

In the year In the lead-up to the 2008 recession, Michael Lewis’s best-selling book “The Big Short” helped the two actors compete with the mortgage market. As it turns out, they were right and made millions.

Now, Burt believes the mortgage market is anticipating another systemic issue: flood risk. If real, he warns, the decline could resemble the massive correction seen during the global financial crisis.

“Ultimately, until people have good information about what these climate-related costs look like, we’re creating new problems every day. I think that’s the crux of the matter,” Burt told CNBC.

So why does the US housing market seem to have underestimated the cost of flooding? What does this mean for home owners and home buyers in the UK and around the world? And what can be done to reduce this risk?

Watch the video above to find out.

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