The Impact of Hurricane Ivan on Expected Flood Losses, Perceived Flood Risk, and Property Values

The catastrophic affects of Hurricane Ivan on the Florida Panhandle real estate market raised growing concerns over the number of households located within the floodplain areas of coastal communities. Results from a hedonic property price model indicate that subsidized insurance premiums create a market imbalance by reducing expected flood losses and perceived risks associated with living in floodplain areas. Results also reveal that Ivan created an adjustment in the real estate market, increasing expected flood losses by 75 percent and raising flood risk perceptions. Finally, results indicate that further changes or a restructuring of the system may be necessary to curb households’ appetite for coastal living and offset the apparent imbalance in the real estate market.