Wednesday, October 28, 2020

Neglected No More: Housing Markets, Mortgage Lending, and Sea Level Rise

In this paper, we explore dynamic changes in the capitalization of sea-level rise (SLR) risk in housing and mortgage markets. Our results suggest a disconnect in coastal Florida real estate: From 2013-2018, home sales volumes in the most-SLR-exposed communities declined 16-20% relative to less-SLR-exposed areas, even as their sale prices grew in lockstep. Between 2018-2020, however, relative prices in these at-risk markets finally declined by roughly 5% from their peak. Lender behavior cannot reconcile these patterns, as we show that both all-cash and mortgage-financed purchases have similarly contracted, with little evidence of increases in loan denial or securitization. We propose a demand-side explanation for our findings where prospective buyers have become more pessimistic about climate change risk than prospective sellers. The lead-lag relationship between transaction volumes and prices in SLR-exposed markets is consistent with dynamics at the peak of prior real estate bubbles. 
Miami during a king tide (October 17, 2016)

by Benjamin J. Keys & Philip Mulder
National Bureau of Economic Research (NBER)
Issue Date October 2020

No comments:

Post a Comment