Seeing this post on Vox got me thinking – I wonder how housing prices vary in response to disaster risk when the risk is forecasted over a longer term rather than a shorter term? I've read a bit of the literature on the housing price response to hurricane risk and climate change-based flood risk (from a certain blogger here as well as my undergraduate advisor no less) and covered some basics but I don't think I've seen a comparative study.
It seems that short term risk predictions would be more likely to be internalized in the price. For one, disasters such as hurricanes seem to strike more often so they're often more salient in homeowners' minds. Additionally, many of the predictions often comprise of statements such as "more intense hurricanes are likely to hit X area over the next 8 years," which seems a little more digestable than "there is a 56.2% chance of having a huge earthquake somewhere in your relative vicinity over the next 50 years" which is how many earthquake studies read.
Given the housing prices in the San Francisco Bay Area, where I live, I find it hard to believe that climate change risk and earthquake risk are being appropriately priced into the housing stock around here. That being said, it is also entirely possible that there are governmental programs that are distorting risk pricing as well. Discount rates could play into this as well – I suppose many people will just discount away any risk beyond some threshold (see here for what economists tend to think about discount rates in comparison to observed discount rates).
If anyone has a good place to point me for articles comparing short run and long run distaster risks and how (or if) it is priced into housing stocks, I would be grateful for the reading!
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