Flooding and Liquidity on the Bayou: The Capitalization of Flood Risk into House Value and Ease-of-Sale

    Authors

    G. K. Turnbull; V. Zahirovic-Herbert;C. Mothorpe

    Comments

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    Abbreviated Journal Title

    Real Estate Econ.

    Keywords

    NATURAL HAZARDS; PROPERTY-VALUES; LISTING PRICE; REAL-ESTATE; MARKET; LOCATION; MODELS; TIME; EXTERNALITIES; Business, Finance; Economics; Urban Studies

    Abstract

    The existing literature focuses on how perceived flood risk affects house value. Search theory, however, implies that flood risks will be capitalized into both house price and liquidity. This article draws on search theory to develop an empirical approach for estimating flood risk capitalization into both price and selling time. The results show the mix of price and liquidity capitalization varies by level of flood risk as well as across housing market phases. Regardless of the specific capitalization pattern, the results illustrate that focusing solely on price without allowing for concomitant liquidity capitalization can yield estimates that understate the full impact of flood risk on house transactions.

    Journal Title

    Real Estate Economics

    Volume

    41

    Issue/Number

    1

    Publication Date

    1-1-2013

    Document Type

    Article

    Language

    English

    First Page

    103

    Last Page

    129

    WOS Identifier

    WOS:000315402800004

    ISSN

    1080-8620

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