Flood Risk and Housing Market

Abstract

Hedonic model has been widely used in research that examine the impact of flood risk on property price, which further reflect how households form and update their belief of flood risk. This paper examines a question that have been overlooked by previous studies - What’s the impact of flood risk on housing supply. Considering that the composition of houses on the market before and after hurricane are usually not the same, we are also interested how does change in housing supply affect hedonic price model results. We use housing transaction records in Harris County, Texas right before and after the Hurricane Harvey and estimate both Difference-in-Difference and duration model. We find that houses in 100-year flood zone are sold faster than those outside during a short-term after Hurricane Harvey. We also find that control for housing supply in hedonic price model may lead to different results.