Analyzing the impact of Hurricane Matthew on the housing market in Savannah Georgia
Date
2022
Authors
Wrigley, Adam, author
Hill, Alexandra, advisor
Suter, Jordan, advisor
Iverson, Terry, committee member
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Abstract
This study seeks to shed light on the relationship between destructive hurricanes and public belief in the increasing risk to homeownership from these storms as climate change progresses. We investigate the impact of Hurricane Matthew on transaction prices of properties in the city of Savannah, Georgia because it is an example of a natural disaster which was unique in severity for its era but is characteristic of storms which will become more common with warmer oceans and higher sea levels (IPPC 2021). Hurricane Matthew made landfall in 2016. It was the first category 5 hurricane in the Atlantic since 2007 and occurred late in the season relative to previous hurricanes in the area. We use a hedonic modeling approach to shed light on the perceived risk and vulnerability of owning low elevation real estate by comparing property prices before and after the hurricane. We do this to speculate on whether the impact of a single storm can noticeably change the behavior of market participants in a location. Within our hedonic modeling framework, we employ several econometric specifications including a difference-in-difference regression, an event study model, and a repeated sales model. Our findings indicate that homebuyers were willing to pay a premium for more protected homes, i.e. higher elevation homes, compared with less protected homes, i.e. lower elevation homes, in the two years after the storm. This changing preference for relatively safer homes within a county, at the expense of the amenities available to the low elevation homes such as ocean views, is consistent with increased belief in the immediate dangers of climate change following a destructive event.
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Subject
Hurricane Matthew
climate change