Working Paper: NBER ID: w25984
Authors: Nicholas Z. Muller; Caroline A. Hopkins
Abstract: This study uses hedonic property models to explore how coastal real estate markets subject to heterogeneous information treatments respond to flood risk. We identify reactions to flood risk, distinctly from price effects due to flood damage, by examining non-local flooding events. Utilizing a difference-in-difference methodology, we test whether the coastal real estate market in New Jersey responds to several well-publicized hurricanes and tropical storms that did not strike the Atlantic seaboard. We find that homes in high flood risk zones situated in towns that participate in public flood awareness activities incur a 7 to 16 percent decrease in price after the non-local shock.
Keywords: Flood Risk; Real Estate Market; Hedonic Pricing; Public Awareness; Climate Change
JEL Codes: H41; Q51; Q54; R31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nonlocal flooding shocks (F65) | homeowners' beliefs regarding their own flood risk (R21) |
| homeowners' beliefs regarding their own flood risk (R21) | market behavior (D40) |
| nonlocal flooding shocks (F65) | price decrease of homes in high flood risk zones (R21) |
| flood risk information (Q54) | market responses in CRS towns (R23) |
| CRS participation (R50) | property prices in high-risk zones post-storm (R31) |