The Impact of Hurricane Mitigation Features and Inspection Information on House Prices

Dean Gatzlaff (), Kathleen McCullough (), Lorilee Medders () and Charles M. Nyce ()
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Dean Gatzlaff: Florida State University
Kathleen McCullough: Florida State University
Lorilee Medders: Florida State University
Charles M. Nyce: Florida State University

The Journal of Real Estate Finance and Economics, 2018, vol. 57, issue 4, No 2, 566-591

Abstract: Abstract This paper examines the effect of hurricane mitigation features and their verification on the transaction prices of single-family homes. Some of these features are obvious to buyers and sellers (visible) and others are not easily observed (hidden). Prior research on the relationship between mitigation features and house prices has implicitly assumed the features are known and that buyers and sellers are equally informed. This paper contributes to the literature by examining the potentially different effects of the visible and hidden features, and the verification of each by professional inspection, on prices in an environment of incomplete and asymmetric buyer-seller information. Generally, findings are consistent with expectations – that visible mitigation features are positively correlated with price increases; that the effects of the visible and hidden features on price differ significantly; and that inspection information significantly increases the implicit price of hidden features. Interestingly, the inspection is found to also increase the implicit price of the set of visible features, suggesting the implicit prices of characteristics that are, or should be, visible to buyers and sellers may be affected by verification or disclosure.

Keywords: House prices; Asymmetric information; Information disclosure (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11146-017-9627-y

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