Risk Discounts after Superstorm Sandy- Short-Run Evidence from Residential Property Sales in New York City
Sunday, April 9, 2017 : 12:25 PM
HUB 367 (University of California, Riverside)
*Names in bold indicate Presenter
In October 2012, Superstorm Sandy inflicted significant costs on the northeastern seaboard of the United States, as much as $41.9 billion in lower New York alone. Climate studies estimate changing storm climatology in the next 100 years will expose New York City (NYC) to a higher incidence of similar storm surges in the future. In order to better grasp responsiveness to weather shocks and the internalization of risk among residents and market actors in affected areas, the following analysis examines proportional changes in average residential property sale prices of NYC’s 55 Public Use Microdata Areas (PUMAs) across a number of periods between 2011 and 2014, including one-, two-, and three-year differences. While the results of this analysis indicate the residential NYC real estate market is generally strong, with positive aggregate growth in each year since Sandy, simple difference-in-differences regression analyses also indicate a risk discount may have emerged in areas affected by Sandy’s storm surge in the years following the storm. These findings corroborate previous research which indicate residential property risk discounts emerge in areas affected by climate shocks (e.g. floods), but may prematurely dissipate after the shock. In this sense, residential real estate markets in flood-prone areas may not accurately reflect increasing risks of environmental shocks. This analysis intensively analyzes FEMA and NYC Department of Finance data using ArcGIS and Stata.