Storm surges, informational shocks, and the price of urban real estate: An application to the case of Hurricane Sandy

Jeffrey P. Cohen, Jason Barr and Eon Kim

Regional Science and Urban Economics, 2021, vol. 90, issue C

Abstract: The impacts of a major hurricane on residential real estate can be devastating. Hurricane Sandy in New York City (NYC) is among the examples of how flooding can unexpectedly extend beyond FEMA flood zones. Such surprises or negative shocks can provide property owners—especially those not flooded—with new information about future flood risks, based on the difference of the property distance from the mapped flood zone and the distance to the actual locations of flooding. We use a difference-in-differences approach to quantify the effects of these shocks on residential property values for non-flooded NYC properties after Sandy. The short-run negative “surprise” effect was to lower NYC housing prices by about 6%–7% for each mile (or about 2% per standard deviation) difference between the property distance from the flood zone and the distance to the actual locations of flooding. The corresponding positive “surprise” effect is insignificant. The long-term surprise effects of flood risk on housing prices tend to disappear, as residents’ memories of the surprise fade and they seem to only recall the actual storm surge several years after the hurricane.

Keywords: Hurricane Sandy; Storm surges; New York City; Real estate prices (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:90:y:2021:i:c:s0166046221000545

DOI: 10.1016/j.regsciurbeco.2021.103694

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