Real Estate Market Response to Enhanced Building Codes in Moore, OK

Abstract

Moore, OK, suffered 3 violent tornadoes from 1999-2013, the most recent causing $3 billion in damage and 24 fatalities. In response the city took the rare step of enhancing their building code based on wind engineering principles. To meet the new code, the Moore Association of Home Builders estimated an added cost of $1.00 per square foot but realized costs are closer to $2.00. Economic theory suggests that an isolated regulatory action will shift production to areas without the added cost, reducing quantity supplied of homes in Moore and potentially driving up price. We use a difference in difference regression model to compare the effect of the new code using Multiple Listing Services (MLS) data from Moore and an adjoining town, Norman, to examine the market impact of the new code. Our result show the code had no effect on either home sales or price per square foot for new homes in Moore.