The Influence Of The Threat Of Flooding On Housing Values In Fargo, North Dakota And Moorhead, Minnesota
AbstractThe hedonic valuation method (HVM) was used to quantify the impact of the threat of flooding on housing values in Fargo, North Dakota and Moorhead, Minnesota (Fargo-Moorhead). Prices of 3,783 Fargo-Moorhead homes sold between 1995 and 1998 were regressed against structural housing characteristics, neighborhood and environmental indicators, and three flood risk variables. Being located in the 100-year floodplain lowered the sale price of an average home by $8,990 and approximately 81 percent of the price depreciation was associated with required flood insurance premiums. After the extensive 1997 flood, homes in the 100-year floodplain were on average priced $10,241 less than similar homes located outside the floodplain and before the 1997 flood event. The aftermath of publicity of the 1997 flood was specifically responsible for average 100-year floodplain homes being reduced by an additional $1,350. In contrast, homes in the 500-year floodplain on average sold for $3,100 more than similar homes not in the floodplain. It was concluded that homebuyers in Fargo-Moorhead place a value on flooding risk, that more disclosure is needed regarding the location of the 500-year floodplain, and that substantial housing value related benefits are likely to be generated by various flood mitigation projects in the area that result in a re-designation and reduction of the 100-year floodplain.
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Bibliographic InfoPaper provided by North Dakota State University, Department of Agribusiness and Applied Economics in its series Agricultural Economics Reports with number 23155.
Date of creation: 1999
Date of revision:
Hedonic valuation method; flooding; floodplain; Fargo; Moorhead; Red River of the North; housing values; Community/Rural/Urban Development;
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- Doss, Cheryl R. & Taff, Steven J., 1993. "The Relationship Of Property Values And Wetlands Proximity In Ramsey County, Minnesota," Economic Reports 13086, University of Minnesota, Department of Applied Economics.
- Daniel, Vanessa E. & Florax, Raymond J.G.M. & Rietveld, Piet, 2009.
"Flooding risk and housing values: An economic assessment of environmental hazard,"
Elsevier, vol. 69(2), pages 355-365, December.
- Vanessa E. Daniel & Raymond J.G.M. Florax & Piet Rietveld, 2007. "Flooding Risk And Housing Values: An Economic Assessment Of Environmental Hazard," Working Papers 07-02, Purdue University, College of Agriculture, Department of Agricultural Economics.
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