Hurricanes, Catastrophic Risk, and Real Estate Market Recovery

Executive Summary.This paper examines data from the Cape Fear region of North Carolina, an area at elevated exposure to hurricanes and catastrophic risk. The findings support an earlier documented pattern of price declinations with successive hurricane landfalls. The findings also reveal a tempering of this trend in the years after the last major strike in 1999. A test statistic is constructed for the timing and intensity of the real estate market reaction to perceptions of catastrophic risk. A Chow test is used to frame market responses to repeated hurricane landfalls in the study area. The test reveals a structural shift in the housing market in the periods following the last two in a series of four hurricanes. Home prices recover and market stability returns in the years following the last storm. The findings are important to varied stakeholders in the coastal real estate market.