IDEAS home Printed from https://ideas.repec.org/a/eee/regeco/v90y2021ics0166046221000545.html
   My bibliography  Save this article

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

Author

Listed:
  • Cohen, Jeffrey P.
  • Barr, Jason
  • Kim, Eon

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.

Suggested Citation

  • Cohen, Jeffrey P. & Barr, Jason & Kim, Eon, 2021. "Storm surges, informational shocks, and the price of urban real estate: An application to the case of Hurricane Sandy," Regional Science and Urban Economics, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:regeco:v:90:y:2021:i:c:s0166046221000545
    DOI: 10.1016/j.regsciurbeco.2021.103694
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0166046221000545
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.regsciurbeco.2021.103694?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ajita Atreya & Jeffrey Czajkowski, 2019. "Graduated Flood Risks and Property Prices in Galveston County," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 47(3), pages 807-844, September.
    2. David Card & Gordon B. Dahl, 2011. "Family Violence and Football: The Effect of Unexpected Emotional Cues on Violent Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 103-143.
    3. Okmyung Bin & Ben Poulter & Christopher F. Dumas & John C. Whitehead, 2011. "Measuring The Impact Of Sea‐Level Rise On Coastal Real Estate: A Hedonic Property Model Approach," Journal of Regional Science, Wiley Blackwell, vol. 51(4), pages 751-767, October.
    4. V. Smith & Jared Carbone & Jaren Pope & Daniel Hallstrom & Michael Darden, 2006. "Adjusting to natural disasters," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 37-54, September.
    5. Ajita Atreya & Susana Ferreira & Warren Kriesel, 2013. "Forgetting the Flood? An Analysis of the Flood Risk Discount over Time," Land Economics, University of Wisconsin Press, vol. 89(4), pages 577-596.
    6. Jared Carbone & Daniel Hallstrom & V. Smith, 2006. "Can Natural Experiments Measure Behavioral Responses to Environmental Risks?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 33(3), pages 273-297, March.
    7. Ajita Atreya & Susana Ferreira, 2015. "Seeing is Believing? Evidence from Property Prices in Inundated Areas," Risk Analysis, John Wiley & Sons, vol. 35(5), pages 828-848, May.
    8. Zhang, Lei, 2016. "Flood hazards impact on neighborhood house prices: A spatial quantile regression analysis," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 12-19.
    9. Shawn J. McCoy & Xiaoxi Zhao, 2018. "A City under Water: A Geospatial Analysis of Storm Damage, Changing Risk Perceptions, and Investment in Residential Housing," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(2), pages 301-330.
    10. Bin, Okmyung & Landry, Craig E., 2013. "Changes in implicit flood risk premiums: Empirical evidence from the housing market," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 361-376.
    11. Don N. MacDonald & James C. Murdoch & Harry L. White, 1987. "Uncertain Hazards, Insurance, and Consumer Choice: Evidence from Housing Markets," Land Economics, University of Wisconsin Press, vol. 63(4), pages 361-371.
    12. Pommeranz, Carolin & Steininger, Bertram, 2020. "Spatial spillovers in the pricing of flood risk: Insights from the housing market," Working Paper Series 20/8, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    13. Ortega, Francesc & Taṣpınar, Süleyman, 2018. "Rising sea levels and sinking property values: Hurricane Sandy and New York’s housing market," Journal of Urban Economics, Elsevier, vol. 106(C), pages 81-100.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Boto-García & Veronica Leoni, 2022. "The hedonic value of coastal amenities in peer-to-peer markets," DEA Working Papers 94, Universitat de les Illes Balears, Departament d'Economía Aplicada.
    2. David Boto-García & Veronica Leoni, 2023. "The Economic Value of Coastal Amenities: Evidence from Beach Capitalization Effects in Peer-to-Peer Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(2), pages 529-557, February.
    3. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    4. Justin Contat & Carrie Hopkins & Luis Mejia & Matthew Suandi, 2024. "When climate meets real estate: A survey of the literature," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(3), pages 618-659, May.
    5. Amine Ouazad & Matthew E. Kahn, 2023. "Mortgage Securitization Dynamics in the Aftermath of Natural Disasters: A Reply," Papers 2305.07179, arXiv.org.
    6. Yaoxuan Huang & Victor Jing Li & Daikun Wang, 2024. "New town development and housing affordability: A case study in Hong Kong," Environment and Planning B, , vol. 51(3), pages 763-777, March.
    7. Jeffrey P. Cohen & Felix L. Friedt & Jackson P. Lautier, 2022. "The impact of the Coronavirus pandemic on New York City real estate: First evidence," Journal of Regional Science, Wiley Blackwell, vol. 62(3), pages 858-888, June.
    8. Wen‐Chi Liao & Yilan Luo & Yajie Sun, 2022. "Information shock of disaster and hazard: Impact of Kaohsiung gas explosions and risk disclosure on the equalizing difference in the housing market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(6), pages 1492-1531, November.
    9. Liang, Cong & Huang, Yaoxuan & Yip, Tsz Leung & Li, Victor Jing, 2022. "Does rail transit development gentrify neighborhoods? Evidence from Hong Kong," Transportation Research Part A: Policy and Practice, Elsevier, vol. 155(C), pages 354-372.
    10. Jose J. Canals-Cerda & Raluca Roman, 2021. "Climate Change and Consumer Finance: A Very Brief Literature Review," Consumer Finance Institute discussion papers 21-04, Federal Reserve Bank of Philadelphia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pollack, Adam B. & Kaufmann, Robert K., 2022. "Increasing storm risk, structural defense, and house prices in the Florida Keys," Ecological Economics, Elsevier, vol. 194(C).
    2. Justin Contat & Carrie Hopkins & Luis Mejia & Matthew Suandi, 2024. "When climate meets real estate: A survey of the literature," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(3), pages 618-659, May.
    3. Matthew Gibson & Jamie T. Mullins & Alison Hill, 2019. "Climate Risk and Beliefs: Evidence from New York Floodplains," Department of Economics Working Papers 2019-02, Department of Economics, Williams College.
    4. Allan Beltrán & David Maddison & Robert J. R. Elliott, 2018. "Assessing the Economic Benefits of Flood Defenses: A Repeat‐Sales Approach," Risk Analysis, John Wiley & Sons, vol. 38(11), pages 2340-2367, November.
    5. Graff Zivin, Joshua & Liao, Yanjun & Panassié, Yann, 2023. "How hurricanes sweep up housing markets: Evidence from Florida," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    6. McCoy, Shawn J. & Walsh, Randall P., 2018. "Wildfire risk, salience & housing demand," Journal of Environmental Economics and Management, Elsevier, vol. 91(C), pages 203-228.
    7. Lei Zhang & Tammy Leonard, 2019. "Flood Hazards Impact on Neighborhood House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 58(4), pages 656-674, May.
    8. Quyen Nguyen & Paul Thorsnes & Ivan Diaz‐Rainey & Antoni Moore & Simon Cox & Leon Stirk‐Wang, 2022. "Price recovery after the flood: risk to residential property values from climate change‐related flooding," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(3), pages 532-560, July.
    9. Beltrán, Allan & Maddison, David & Elliott, Robert, 2019. "The impact of flooding on property prices: A repeat-sales approach," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 62-86.
    10. Justin Tyndall, 2023. "Sea Level Rise and Home Prices: Evidence from Long Island," The Journal of Real Estate Finance and Economics, Springer, vol. 67(4), pages 579-605, November.
    11. Jose J. Canals-Cerda & Raluca Roman, 2021. "Climate Change and Consumer Finance: A Very Brief Literature Review," Consumer Finance Institute discussion papers 21-04, Federal Reserve Bank of Philadelphia.
    12. Mutlu, Asli & Roy, Debraj & Filatova, Tatiana, 2023. "Capitalized value of evolving flood risks discount and nature-based solution premiums on property prices," Ecological Economics, Elsevier, vol. 205(C).
    13. David Wolf & Kenji Takeuchi, 2022. "Who Gives a Dam? Capitalization of Flood Protection in Fukuoka, Japan," Discussion Papers 2203, Graduate School of Economics, Kobe University.
    14. Robert J. Johnston & Klaus Moeltner, 2019. "Special Flood Hazard Effects on Coastal and Interior Home Values: One Size Does Not Fit All," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 181-210, September.
    15. Donggyu Yi & Hyundo Choi, 2020. "Housing Market Response to New Flood Risk Information and the Impact on Poor Tenant," The Journal of Real Estate Finance and Economics, Springer, vol. 61(1), pages 55-79, June.
    16. Qiu, Yun & Gopalakrishnan, Sathya, 2018. "Shoreline defense against climate change and capitalized impact of beach nourishment," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 134-147.
    17. Paolo Avner & Vincent Viguié & Bramka Arga Jafino & Stephane Hallegatte, 2022. "Flood Protection and Land Value Creation – Not all Resilience Investments Are Created Equal," Economics of Disasters and Climate Change, Springer, vol. 6(3), pages 417-449, November.
    18. Małgorzata Dudzińska & Barbara Prus & Radosław Cellmer & Stanisław Bacior & Katarzyna Kocur-Bera & Anna Klimach & Agnieszka Trystuła, 2020. "The Impact of Flood Risk on the Activity of the Residential Land Market in a Polish Cultural Heritage Town," Sustainability, MDPI, vol. 12(23), pages 1-18, December.
    19. Agustín Indaco & Francesc Ortega & Süleyman Taṣpınar, 2021. "Hurricanes, flood risk and the economic adaptation of businesses," Journal of Economic Geography, Oxford University Press, vol. 21(4), pages 557-591.
    20. Laura A. Bakkensen & Xiaozhou Ding & Lala Ma, 2019. "Flood Risk and Salience: New Evidence from the Sunshine State," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1132-1158, April.

    More about this item

    Keywords

    Hurricane Sandy; Storm surges; New York City; Real estate prices;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:90:y:2021:i:c:s0166046221000545. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/regec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.