A nonprofit conservation group has accused federal housing appraisers of overlooking serious water supply issues when valuing properties in parts of southern Arizona, raising concerns that home prices may be inflated in areas where water availability is uncertain. The Center for Biological Diversity, based in Tucson, said it obtained internal documents suggesting that appraisers working for the U.S. Department of Housing and Urban Development and the Federal Housing Administration are not taking into account environmental water scarcity risks in their assessments of homes, particularly in the Sierra Vista and Fort Huachuca region. According to the group, this omission could mask real property value declines linked to long-term water shortages.

The conservation organization argues that ignoring water availability and drought risk can mislead buyers and lenders, potentially creating a housing bubble in communities facing increasing pressure on groundwater and municipal supplies. The documents obtained by the group via a Freedom of Information Act request reportedly show that appraisers used by federal agencies failed to consider water scarcity warnings, regional aquifer declines, and other hydrological factors when preparing valuation reports that influence mortgage backing and lending decisions.

Advocates say that failing to account for water issues in appraisals undermines the reliability of real estate valuations in a region where climate conditions and prolonged drought have stressed water resources for years. They warn this could cause long-term economic harm if property values are based on inaccurate assumptions about water availability. The Center for Biological Diversity is urging federal agencies and regulators to update appraisal guidelines to require a stronger assessment of water risk, so homeowners and buyers have a clearer understanding of environmental challenges that can affect property values.