Coastal Flooding and Housing Market Liquidity: Policy Implications for Eastern U.S. Communities

Wai Yan Siu and Sitti Rex

No 360725, 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO from Agricultural and Applied Economics Association

Abstract: Coastal flooding poses an escalating threat to communities across the U.S East Coast, where rising sea levels and intensifying storms increasingly overwhelm existing infrastructure and natural defenses. These events generate complex economic consequences that extend beyond immediate property damage to affect community stability and long-term development patterns. The real estate industry in particular, faces increasing levels of flood risk. Existing research on climate risk and real estate markets focuses predominantly on price capitalization effects, overlooking the critical dimension of housing market liquidity. This study examines the causal impact of coastal flooding on days-on-market (DOM), a metric of liquidity in the housing market. We use National Oceanic and Atmospheric Administration (NOAA) tidal data for coastal zip codes in the U.S. East Coast and information from the real estate market from 2017 to 2024. DOM and tidal flooding may be simultaneously affected by factors such as precipitation and mitigation policies, which raise concerns about endogeneity in estimation. We employ a two-stage least squares (2SLS) approach to address these endogeneity concerns, using wind speed and direction as instruments. Our preliminary findings suggest that a one-percentage-point increase in flood exposure extends the DOM by approximately 0.86 to 0.99 days, 1.2% increase relative to the sample mean. When scaled across thousands of properties, these seemingly modest individual effects represent millions of dollars in delayed housing capital turnover and significant impacts on local tax bases.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 28
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea25:360725

DOI: 10.22004/ag.econ.360725

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