By Cynthia Corzo
While homeowners’ focus on the effects of a hard-hitting storm increased even when the hurricane was far away, the financial impact and their attention to flooding probabilities was short-lived, research from FIU Business shows.
Researchers examined the impact of Hurricane Sandy – the deadliest, most destructive storm of the 2012 Atlantic hurricane season – on property values in Miami-Dade County.
“Miami-Dade is very vulnerable in the case of major storms,” said Lu Fang, assistant professor in the Hollo School of Real Estate, who conducted the research. “When people buy a house or make real estate investments, they must keep in mind whether their property is exposed to high flood risk.”
The study, published in the January 2023 issue of the Journal of Real Estate Finance and Economics, looked at transactions of single-family houses between January 2005 and December 2014.
It revealed that in 2005, after a series of direct storms in 2004 and 2005, homebuyers in Miami-Dade placed a price discount of approximately 4% on single-family properties in high flood-risk zones, based on RealtyTrac data from residential real estate transactions in the county. By contrast, during quiet hurricane seasons, properties within high flood-hazard zones commanded a 4% to 6% price premium.
“It’s not surprising because properties in high flood-risk zones are usually near the ocean, rivers or lakes enjoying those waterrelated amenities and are more expensive,” said Fang. “After Sandy that premium disappeared; home sale prices in high floodrisk zones dropped more significantly compared to houses in low flood-risk zones.”
Hurricane Sandy’s attack on the U.S. East Coast caused many in Miami-Dade to take notice of flood risks in their neighborhoods. Those living near the coastline rapidly increased their awareness of flooding, whereas those with homes farther inland didn’t. Researchers tracked the intensity of weekly Google trend searches of keywords associated with hurricanes and flooding.
“Even though it’s a distant event, because it is destructive, it raises homeowners’ perception of flood risk,” Fang said.
While a large-scale but distant hurricane like Sandy reshaped home buyers’ perception of flood risk, the focus was short-lived...roughly one quarter, researchers determined.
Fang conducted the research with Lingxiao Li of California State University, Fullerton, and Abdullah Yavas at the University of Wisconsin – Madison.