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The Influence Of The Threat Of Flooding On Housing Values In Fargo, North Dakota And Moorhead, Minnesota

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  • Fridgen, Patrick M.
  • Shultz, Steven D.
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    Abstract

    The 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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    File URL: http://purl.umn.edu/23155
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    Bibliographic Info

    Paper provided by North Dakota State University, Department of Agribusiness and Applied Economics in its series Agricultural Economics Reports with number 23155.

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    Date of creation: 1999
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    Handle: RePEc:ags:nddaer:23155

    Contact details of provider:
    Postal: PO Box 5636, Fargo, ND 58105-5636
    Phone: (701) 231-7441
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    Web page: http://www.ext.nodak.edu/homepages/aedept/
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    Related research

    Keywords: Hedonic valuation method; flooding; floodplain; Fargo; Moorhead; Red River of the North; housing values; Community/Rural/Urban Development;

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    1. 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.
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    Cited by:
    1. Daniel, Vanessa E. & Florax, Raymond J.G.M. & Rietveld, Piet, 2009. "Flooding risk and housing values: An economic assessment of environmental hazard," Ecological Economics, Elsevier, vol. 69(2), pages 355-365, December.

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