Weather Shocks, Housing Prices, and Population: the Role of Expectation Revisions
52 Pages Posted: 30 Apr 2018 Last revised: 14 Jan 2020
Date Written: October 1, 2018
I document empirical regularities of flooding in the US with newly-compiled insured, uninsured, historical loss, and flood zone data at the town level for the decade after 2003. I identify instances with low damage and low risk expectations, implied by the high uninsured share, where experience with or proximity to flooding can raise perceived risk. I examine the causal impact of flood damage on population change and its interaction with the real estate market. I find that risk revisions are important determinant of population change and real estate values. Only growing places with low historic flood loss or those with low-risk flood planes experience population declines. The decline is related to investments in flood risk mitigation which raise cost of living. Elsewhere, higher risk only depreciates house values, causing higher-income households to leave. Floods also have significant spillovers on population and prices in neighbors with no direct damage.
Keywords: Migration, Population, Flood Surprises, Climate Change, Real Estate, Natural Disasters
JEL Classification: R11, R30, J61, Q54
Suggested Citation: Suggested Citation