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.
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| Miami during a king tide (October 17, 2016) https://en.wikipedia.org/wiki/Sea_level_rise |
by Benjamin J. Keys & Philip Mulder
National Bureau of Economic Research (NBER) www.NBER.org
Issue Date October 2020
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| https://en.wikipedia.org/wiki/Sea_level_rise |
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