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Environmental Risk Salience and Real Estate Markets

Author

Listed:
  • Marco Letta
  • Samuel Nocito

Abstract

When do risks become real to economic agents? Many environmental hazards are publicly known long before they cause damage, yet remain economically latent. We study how markets respond when a long-known environmental risk becomes highly salient before catastrophic losses occur, using a natural experiment from Italy where renewed seismic unrest heightened public attention without widespread destruction, fatalities, or formal risk reclassification. Sale prices fall in the most exposed ownership market, while rents rise as households adjust across tenure and space. High-frequency congestion tests show that responses to seismic signals weaken when unrelated events compete for attention, while complementary evidence illustrates the adjustment mechanisms. Salience is an important part of the process through which known environmental risk becomes decision-relevant and capitalized before that risk fully materializes.

Suggested Citation

  • Marco Letta & Samuel Nocito, 2026. "Environmental Risk Salience and Real Estate Markets," CESifo Working Paper Series 13073, CESifo.
    • Handle: RePEc:ces:ceswps:_13073
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    Keywords

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    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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