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The impact of hurricanes on housing prices: evidence from U.S. coastal cities

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  • Anthony Murphy
  • Eric Strobl

Abstract

We investigate the effect of hurricane strikes on housing prices in U.S. coastal cities. To this end, we construct a new index of hurricane destruction which varies over time and space. Using this index and an annual, two equation, dynamic equilibrium correction panel model with area and time fixed effects, we model the effects of hurricanes on real house process and real incomes. In our model hurricanes have a direct effect on house prices and an indirect effect via a fall in local incomes. Our results show that the typical hurricane strike raises real house prices for a number of years, with a maximum effect of between 3 % to 4 % three years after occurrence. There is also a small negative effect on real incomes. These results are stable across models and subsamples.

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Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 1009.

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Date of creation: 2010
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Handle: RePEc:fip:feddwp:1009

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Keywords: Econometric models ; Housing - Prices;

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  1. Joshua Gallin, 2006. "The Long-Run Relationship between House Prices and Income: Evidence from Local Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(3), pages 417-438, 09.
  2. Dennis R. Capozza & Patric H. Hendershott & Charlotte Mack, 2004. "An Anatomy of Price Dynamics in Illiquid Markets: Analysis and Evidence from Local Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(1), pages 1-32, 03.
  3. William D. Nordhaus, 2006. "The Economics of Hurricanes in the United States," NBER Working Papers 12813, National Bureau of Economic Research, Inc.
  4. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, number 9780521725200, October.
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  8. Eric Strobl, 2011. "The Economic Growth Impact of Hurricanes: Evidence from U.S. Coastal Counties," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 575-589, May.
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  16. Hallstrom, Daniel G. & Smith, V. Kerry, 2005. "Market responses to hurricanes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 541-561, November.
  17. 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, vol. 47(3), pages 317-330, December.
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  19. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, number 9780521898010, October.
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Cited by:
  1. Deryugina, Tatyana, 2011. "The Role of Transfer Payments in Mitigating Shocks: Evidence From the Impact of Hurricanes," MPRA Paper 53307, University Library of Munich, Germany, revised 08 Aug 2013.

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