Natural Disasters and Housing Prices

The impact of tornados on housing prices has not been extensively explored in a causal analysis  framework. We estimate the effects of damage from a major tornado in Little Rock, Arkansas on prices of nearby undamaged homes. We study how a typical home’s proximity to damaged properties might have led  to a discount in its price due to severe blight in the neighborhood. We focus on homes that sold between  January 2022 and August 2024 and compare the effects of the March 31, 2023, tornado on sale prices for  homes near versus far from damaged homes. For all home sales within 250 meters of at least one tornadodamaged home, our difference-in-differences estimates imply an average discount of 29 to 35 percent relative  to home sales further away. These effects attenuate with greater distance from the nearest damaged home. The presence of each additional damaged home nearby led to a significant home price discount in the range  of 8 percent (within 250 meters) to 2 percent (within 500 meters). Homes in lower-income Census blocks did not incur price effects that were significantly different from the effects for other home

 The authors acknowledge the excellent research assistance of Cole Kurokawa, Weidong Li, Lindsey Sanderson and  Jake Shufro. Participants at the 2024 Federal Reserve System Regional Meetings in Atlanta provided helpful  comments