Real Estate Market Response to Coastal Flood Hazards

Abstract

This study estimates the effects of flood hazard on residential property values using a hedonic property price method. We utilize digital flood maps coupled with extensive residential property sales records between September 2000 and September 2004 from Carteret County, North Carolina. Carteret County is a coastal county that contains numerous floodplains including areas subject to wave action. Our results indicate that on average property values are 5–10% lower if located within a flood zone that is not subject to wave action. However, location within a flood zone that is vulnerable to wave action is associated with higher property values. We find that, in most inland areas, price differentials for flood risk are roughly equivalent to the capitalized value of flood insurance premiums. However, the risk of coastal flooding seems inconsequential in determining property values due to the substantial premiums that appear to be associated with proximity to coastal water.