Download or read book Perception of Increasing Wildfire Risk Lowers Appreciation of Residential Real Estate in California written by Xinkun Nie and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Wildfires exacerbated by climate change are a growing issue in the US. However, the full economic implications of wildfires for the housing market are largely unknown. As a case study, we estimate the effect of changing wildfire risk perceptions on residential home sale prices in California. We employ cutting edge tools from causal inference to understand an often hard to estimate channel for the economic effects of natural disasters exacerbated by climate change: the cascading impact of changing risk perception on housing markets. Because of heightened risk perceptions of wildfires relative to pre-2015 levels, since 2015, homes in census tracts with high wildfire risk in California sell for 7.5% less than they otherwise would have. For an average California homeowner in a high wildfire risk census tract, this is a $37,715 loss due to lower home value appreciation, in part due to increased insurance costs. The impacts of this reduced appreciation are expected to extend beyond homeowners and have adverse effects on statewide revenues due to lower property taxes. We discuss how policy solutions that ignore these considerations may be inadequate in responding to the challenge of increasing climate risk and risk salience in the context of California wildfires.