Journal of Forest Economics > Vol 33 > Issue 1

The effect of natural disasters on housing prices: An examination of the Fourmile Canyon fire

Katherine A. Kiel, , kkiel@holycross.edu Victor A. Matheson, , vmatheso@holycross.edu
 
Suggested Citation
Katherine A. Kiel and Victor A. Matheson (2018), "The effect of natural disasters on housing prices: An examination of the Fourmile Canyon fire", Journal of Forest Economics: Vol. 33: No. 1, pp 1-7. http://dx.doi.org/10.1016/j.jfe.2018.09.002

Published: 0/12/2018
© 0 2018 Katherine A. Kiel, Victor A. Matheson
 
Subjects
 
Keywords
JEL Codes:Q54R11R21
DisastersForest firesHousingClimate change
 

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In this article:
Introduction
Literature review
Data and model
Results
Conclusions

Abstract

In September 2010, the Fourmile-Lefthand Canyon forest fire burned 6181 acres, destroyed 169 homes, and caused $217 million in property damages making it by far the most expensive fire in Colorado history at the time. This paper examines how the fire affected housing prices in vulnerable neighboring areas that were not directly impacted by the fire, controlling for the property’s level of risk. This damaging fire may have increased home owners’ perceptions about the risk of living in forested areas subject to wildfires to a significant degree adding to the total direct economic losses from the fire. Utilizing a unique fire risk data set and a difference-in-difference approach, we test whether buyers of houses in areas with different risk levels prior to the fire adjust expectations differently. We find buyers in the highest risk area are most likely to change their perceptions in response to a fire with houses in these areas experiencing a statistically significant 21.7% decline in sale price compared to houses in non-risky areas.

DOI:10.1016/j.jfe.2018.09.002