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Valuing Mitigation: Real Estate Market Response to Hurricane Loss Reduction Measures

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  • Kevin M. Simmons

    ()
    (Department of Economics, Oklahoma City University)

  • Jamie Brown Kruse

    ()
    (Department of Economics, Texas Tech University)

  • Douglas A. Smith

    ()
    (Department of Civil Engineering, Texas Tech University)

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    Abstract

    This paper explores valuation of two measures of windstorm mitigation in a Gulf Coast city. Since the home owner is not able to reduce the probability that a hurricane or tropical storm will occur at the structure's location, any voluntary mitigation intended to fortify the home is a form of self-insurance as defined by. This distinction is important because market insurance and self-insurance are substitutes and thus subject to the standard moral hazard problem. Using a unique Multiple Listing Service data set with detailed information on several hurricane mitigation features, we construct two models to test the influence of mitigation on resale price. The results of the hedonic study indicate that individuals place a positive value on a self-insurance type of mitigation.

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    Bibliographic Info

    Article provided by Southern Economic Association in its journal Southern Economic Journal.

    Volume (Year): 68 (2002)
    Issue (Month): 3 (January)
    Pages: 660-671

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    Handle: RePEc:sej:ancoec:v:68:3:y:2002:p:660-671

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    Web page: http://www.southerneconomic.org/
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    Cited by:
    1. Dakshina Silva & Jamie Kruse & Yongsheng Wang, 2008. "Spatial dependencies in wind-related housing damage," Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, vol. 47(3), pages 317-330, December.
    2. Bradley Ewing & Jamie Kruse & Yongsheng Wang, 2007. "Local housing price index analysis in wind-disaster-prone areas," Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, vol. 40(2), pages 463-483, February.
    3. Kevin Simmons & Daniel Sutter, 2007. "Tornado shelters and the manufactured home parks market," Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, vol. 43(3), pages 365-378, December.
    4. Petrolia, Daniel R. & Hwang, Joonghyun & Landry, Craig E. & Coble, Keith H., 2013. "Wind Insurance and Mitigation in the Coastal Zone," Working Papers, Mississippi State University, Department of Agricultural Economics 160462, Mississippi State University, Department of Agricultural Economics.
    5. John Whitehead & Adam Rose, 2009. "Estimating environmental benefits of natural hazard mitigation with data transfer: results from a benefit-cost analysis of Federal Emergency Management Agency hazard mitigation grants," Mitigation and Adaptation Strategies for Global Change, Springer, Springer, vol. 14(7), pages 655-676, October.
    6. Randy Dumm & G. Sirmans & Greg Smersh, 2011. "The Capitalization of Building Codes in House Prices," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 42(1), pages 30-50, January.

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