The Impact of Distant Hurricane on Local Housing Markets

54 Pages Posted: 19 Jun 2020 Last revised: 3 Jun 2021

See all articles by Lu Fang

Lu Fang

Florida International University

Lingxiao Li

California State University, Fullerton

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics

Date Written: May 11, 2020

Abstract

This study investigates whether the local housing markets can be affected by the occurrence of a large-scale but distant hurricane without direct impact. Using a dataset of residential transactions in Miami-Dade County, FL between 2005 and 2014, we find that the impact of a property’s flood risk exposure on its value varies over time, with a price penalty of 4% in hurricane striking period. By contrast, within a quiet hurricane period, properties within high flood hazard zones demand a price premium ranging roughly from 4% to 6%, which may represent the price impact of water-related amenities. The premium declined significantly upon Hurricane Sandy. Several possible explanations are provided and tested to explain the main findings. Our findings indicate that the occurrence of a disastrous hurricane which impacted faraway regions also raised local home buyers’ perception of flood risk, but for a short period of time (one quarter).

Keywords: Hurricanes, Flood Risk, House Price, Perception

Suggested Citation

Fang, Lu and Li, Lingxiao and Yavas, Abdullah, The Impact of Distant Hurricane on Local Housing Markets (May 11, 2020). Available at SSRN: https://ssrn.com/abstract=3611296 or http://dx.doi.org/10.2139/ssrn.3611296

Lu Fang (Contact Author)

Florida International University ( email )

Miami, FL
United States

Lingxiao Li

California State University, Fullerton ( email )

800 N State College St
Fullerton, CA 92831
United States

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

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