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Risk Disclosure and Home Prices: Evidence from California Wildfire Hazard Zones

Author

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  • Lala Ma
  • Margaret Walls
  • Matthew Wibbenmeyer
  • Connor Lennon

Abstract

Damages from wildfires have increased dramatically in recent years. This study uses a boundary discontinuity design to estimate the effect of wildfire-hazard disclosure on house prices. Using the universe of single-family sales transactions from Zillow’s Transaction and Assessment Database in California from 2015 through 2022, we find that, on average, homes facing disclosure requirements sold for approximately 4.3% less than nearby homes that did not. Price impacts are higher in recent years, after several damaging wildfires. Our findings highlight the use of disclosure regulations to ensure that disaster risks are reflected in housing markets.

Suggested Citation

  • Lala Ma & Margaret Walls & Matthew Wibbenmeyer & Connor Lennon, 2024. "Risk Disclosure and Home Prices: Evidence from California Wildfire Hazard Zones," Land Economics, University of Wisconsin Press, vol. 100(1), pages 6-21.
    • Handle: RePEc:uwp:landec:v:100:y:2024:i:1:p:6-21
    Note: DOI: https://doi.org/10.3368/le.100.1.102122-0087R
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    References listed on IDEAS

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    1. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation of Elementary Education," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 577-599.
    2. Jaren C. Pope, 2008. "Do Seller Disclosures Affect Property Values? Buyer Information and the Hedonic Model," Land Economics, University of Wisconsin Press, vol. 84(4), pages 551-572.
    3. 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.
    4. Okmyung Biny & Stephen Polasky, 2004. "Effects of Flood Hazards on Property Values: Evidence Before and After Hurricane Floyd," Land Economics, University of Wisconsin Press, vol. 80(4).
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    Cited by:

    1. Wibbenmeyer, Matthew & Joiner, Emily & Lennon, Connor & Walls, Margaret A. & Ma, Lala, 2024. "Sorting Over Wildfire Hazard," RFF Working Paper Series 24-05, Resources for the Future.
    2. Woongchan Jeon & Lint Barrage & Kieran James Walsh, 2024. "Pricing Climate Risks: Evidence from Wildfires and Municipal Bonds," CESifo Working Paper Series 11447, CESifo.

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    More about this item

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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