The Effect of Natural Disasters on Housing Prices: An Examination of the Fourmile Canyon Fire

Katherine Kiel and Victor Matheson

No 1503, Working Papers from College of the Holy Cross, Department of Economics

Abstract: In September 2010, the Fourmile-Lefthand Canyon forest fire burned 6,181 acres, destroyed 169 homes, and caused $217 million in property damages making it by far the most expensive fire in Colorado history at the time. This paper examines how the fire affected housing prices in vulnerable neighboring areas that were not directly impacted by the fire, controlling for the property’s level of risk. This damaging fire may have increased home owners’ perceptions about the risk of living in forested areas subject to wildfires to a significant degree adding to the total direct economic losses from the fire. Utilizing a unique fire risk data set and a difference-in-difference approach, we test whether buyers of houses in areas with different risk levels prior to the fire adjust expectations differently. We find buyers in the highest risk area are most likely to change their perceptions in response to a fire with houses in these areas experiencing a statistically significant 21.9% decline in sale price.

Keywords: disasters; forest fires; housing; climate change (search for similar items in EconPapers)
JEL-codes: Q54 R11 R21 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2015-08
New Economics Papers: this item is included in nep-env and nep-ure
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Published in Journal of Forest Economics, Volume 33, December 2018, Pages 1-7.

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https://hcapps.holycross.edu/hcs/RePEc/hcx/HC1503-Kiel-Matheson_Wildfires.pdf (application/pdf)

Related works:
Journal Article: The effect of natural disasters on housing prices: An examination of the Fourmile Canyon fire (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hcx:wpaper:1503

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