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The Impact of Distant Hurricane on Local Housing Markets

Author

Listed:
  • Lu Fang

    (Florida International University)

  • Lingxiao Li

    (California State University, Fullerton)

  • Abdullah Yavas

    (University of Wisconsin – Madison)

Abstract

This study investigates whether the local housing markets can be affected by the occurrence of a large-scale but distant hurricane without direct impact. Using a dataset of residential transactions in Miami-Dade County, FL between 2005 and 2014, we find that the impact of a property’s flood risk exposure on its value varies over time, with a price penalty of 4% in hurricane striking period. By contrast, within a quiet hurricane period, properties within high flood hazard zones demand a price premium ranging roughly from 4% to 6%, which may represent the price impact of water-related amenities. The premium declined significantly upon Hurricane Sandy. Several possible explanations are provided and tested to explain the main findings. Our findings indicate that the occurrence of a disastrous hurricane which impacted faraway regions also raised local home buyers’ perception of flood risk, but for a short period of time (one quarter).

Suggested Citation

  • Lu Fang & Lingxiao Li & Abdullah Yavas, 2023. "The Impact of Distant Hurricane on Local Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 327-372, February.
    • Handle: RePEc:kap:jrefec:v:66:y:2023:i:2:d:10.1007_s11146-021-09843-3
    DOI: 10.1007/s11146-021-09843-3
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    References listed on IDEAS

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    Cited by:

    1. Siddhartha Biswas & Mallick Hossain & David Zink, 2023. "California Wildfires, Property Damage, and Mortgage Repayment," Working Papers 23-05, Federal Reserve Bank of Philadelphia.

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