Risk perception in housing markets: Evidence from a fighter jet crash

In this study, we investigate the capitalization of flight accident risk in housing prices near military bases in Virginia from 2003 to 2016. We focus on a localized shock caused by a fighter jet crash into an apartment complex near the Naval Air Station Oceana in Virginia Beach. Although flight accident hazards were transparently disclosed by sellers and local governments years beforehand, the crash led to a temporary (approximately 3 years) decline in the prices of properties within accident potential zones (APZ) and by a lesser magnitude, properties slightly outside the APZ boundaries. This analysis sheds light on how market participants react after an extreme event, emphasizing the role of recency in the capitalization of risk.