High Temperature, Climate Change and Real Estate Prices

Abstract

Combining granular data on temperatures across the continental United States with comprehensive listing-level data for residential properties and survey data on beliefs about climate change from 2000 to 2021, we examine the impact of exposure to local heat shocks on residential real estate prices. We first show that abnormally high local temperature leads to elevated belief in climate change. We find that exposure to local heat shocks results in a significant decrease in house prices, and this effect is more pronounced in communities concerned about global warming, during periods of increasing public attention to climate change and among counties heavily exposed to the risk of sea level rise. In contrast to the transaction price regression, we find no relation between abnormal temperature exposure and rental prices, suggesting that the observed temperature exposure discount is driven by concerns about long-horizon climate risks. Taken together, our results highlight the importance of uncertainty about climate change in affecting the real estate market.