New York City homes that were in the flood zone during Hurricane Sandy saw negative impacts on their price trajectories, and five years on, the persistent price discount shows no signs of vanishing, according to professors from Queens College of the City University of New York.
Economics professors Francesc Ortega and Suleyman Taspinar analyzed Sandy-related impacts on New York City housing prices by looking at sales data from 2003 to 2017 and FEMA data on building damage caused by the hurricane.
While housing values were essentially the same for properties in the flood zone and those elsewhere prior to Sandy, the researchers found robust evidence of a negative hurricane-related impact on the price trajectories of flood-zone homes starting in the quarter immediately after hurricane Sandy. The study estimated a persistent price discount of about 8%, which showed no signs of vanishing five years after the hurricane.
The study’s findings compare to past research that found the homebuyer response to flooding risks to be short-lived. Although regional risk to hurricanes or flooding is consistent from year to year, homebuyers usually consider the risks immediately after a catastrophic event. The effects, however, very often vanish completely within five years.
Additionally, the researchers found that the price trend for flood-zone properties was influenced by whether they were damaged during the storm. For Hurricane Sandy, damaged properties saw an immediate price drop of more than 15%. Prices for these properties partially recovered probably due to repairs and gradual restoration. In contrast, flood-zone properties that were not damaged saw a gradual decline in their value. By 2017, the price discount on these flood-zone properties appears to converge to the same discount as properties that had suffered damage during the storm.
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