Northeast
The Providence Journal / Sandor Bodo

Risk of sea level rise ‘hasn’t hit home’ for coastal R.I. property owners, experts say

PROVIDENCE — Although the risks of sea level rise to coastal properties are becoming more widely understood, they may not being fully accounted for in the real estate market.

“The price of any asset, be it commodities, gold, stocks, depends fundamentally on people’s beliefs,” said Lint Barrage, assistant professor of economics and environmental studies at Brown University. “If people are excessively optimistic about the future value of an asset, there is potential for mispricing, and bubbles and overinvestment.”

Speaking Friday at a one-day conference at Brown on the political and economic consequences of climate change, Barrage described her research on the coastal property market, which included going door-to-door in Rhode Island and interviewing homeowners about flood risk. People with homes in federally designated flood zones tended to underestimate the risk of flooding when compared with people who lived further inland, she found.

“The reason all this matters is that markets cannot price risks efficiently if people don’t believe in them,” she said.

And if the risks of climate change aren’t being accurately factored into prices now, then it could mean a steep drop in values somewhere down the line.

Read full article . . .

Read FLOOD RISK BELIEF HETEROGENEITY AND COASTAL HOME PRICE DYNAMICS: GOING UNDER WATER? Laura A. Bakkensen Lint Barrage, NATIONAL BUREAU OF ECONOMIC RESEARCH