Environmental Risk Salience and Real Estate Markets

Marco Letta and Samuel Nocito

No 13073, CESifo Working Paper Series from CESifo

Abstract: When do risks become real to economic agents? Many environmental hazards are publicly known long before they cause damage, yet remain economically latent. We study how markets respond when a long-known environmental risk becomes highly salient before catastrophic losses occur, using a natural experiment from Italy where renewed seismic unrest heightened public attention without widespread destruction, fatalities, or formal risk reclassification. Sale prices fall in the most exposed ownership market, while rents rise as households adjust across tenure and space. High-frequency congestion tests show that responses to seismic signals weaken when unrelated events compete for attention, while complementary evidence illustrates the adjustment mechanisms. Salience is an important part of the process through which known environmental risk becomes decision-relevant and capitalized before that risk fully materializes.

Keywords: environmental risk; risk salience; housing markets; natural experiment (search for similar items in EconPapers)
JEL-codes: D84 H12 Q54 R31 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-hre and nep-uep
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_13073

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