House Prices and a Flood Event: An Empirical Investigation of Market Efficiency

Terrance R. Skantz and Thomas H. Strickland
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Terrance R. Skantz: University of Houston Clear Lake Houston, Texas 77058-1098, http://www.uh.edu/
Thomas H. Strickland: California State University, Haward Haward, California 94542, http://www.csuhayward.edu/

Journal of Real Estate Research, 1987, vol. 2, issue 2, 75-83

Abstract: In this study, house-price reactions to a first-time disastrous flood are investigated. Conventional wisdom predicted prices would decline and later regain lost value as the market forgot the flood. In fact, sample home prices do not fall immediately after the flood and do not later rise. On the other hand, when flood insurance premiums rise dramatically approximately one year after the flood, these higher rates are capitalized into home values and prices do decline. The findings are consistent with rational and efficient markets.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1987
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Citations: View citations in EconPapers (29)

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