AI-Enhanced Remote Sensing of Land Transformations for Climate-Related Financial Risk Assessment in Housing Markets: A Review

Amid accelerating climate change, climate-related hazards—such as floods, wildfires, hurricanes, and sea-level rise—increasingly drive land transformations and pose growing risks to housing markets by affecting property valuations, insurance availability, mortgage performance, and broader financial stability. This review synthesizes recent progress in two distinct domains and their linkage: (1) assessing climate-related financial risks in housing markets, and (2) applying AI-driven remote sensing for hazard detection and land transformation monitoring. While both areas have advanced significantly, important limitations remain. Existing housing finance studies often rely on static models and coarse spatial data, lacking integration with real-time environmental information, thereby reducing their predictive power and policy relevance. In parallel, remote sensing studies using AI primarily focus on detecting physical hazards and land surface changes, yet rarely connect these spatial transformations to financial outcomes. To address these gaps, this review proposes an integrative framework that combines AI-enhanced remote sensing technologies with financial econometric modeling to improve the accuracy, timeliness, and policy relevance of climate-related risk assessment in housing markets. By bridging environmental hazard data—including land-based indicators of exposure and damage—with financial indicators, the framework enables more granular, dynamic, and equitable assessments than conventional approaches. Nonetheless, its implementation faces technical and institutional barriers, including spatial and temporal mismatches between datasets, fragmented regulatory and behavioral inputs, and the limitations of current single-task AI models, which often lack transparency. Overcoming these challenges will require innovation in AI modeling, improved data-sharing infrastructures, and stronger cross-disciplinary collaboration.