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Flood Hazards, Insurance Rates, and Amenities: Evidence From the Coastal Housing Market
Author(s) -
Bin Okmyung,
Kruse Jamie Brown,
Landry Craig E.
Publication year - 2008
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/j.1539-6975.2007.00248.x
Subject(s) - flood myth , flood insurance , property insurance , property value , value (mathematics) , business , hedonic pricing , actuarial science , geography , real estate , casualty insurance , economics , insurance policy , finance , econometrics , statistics , mathematics , archaeology
This study employs the hedonic property price method to examine the effects of flood hazard on coastal property values. We utilize Geographic Information System data on National Flood Insurance Program flood zones and residential property sales from Carteret County, North Carolina. Our results indicate that location within a flood zone lowers property value. Price differentials for flood risk and the capitalized value of flood insurance premiums are roughly equivalent—both exhibiting a nonlinear relationship in flood probability. Our results support the conclusion that flood zone designation and insurance premiums convey risk information to potential buyers in the coastal housing market.