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Co-authored with Brian Seok
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Abstract:
The lack of consensus regarding home price responses to natural disasters presents a puzzle: Why do some papers find increases while others find decreases? We develop a model illustrating how composition shifts in transactions from ``risky'' to ``safe'' market segments can yield positive price estimates and declining quantities even when prices broadly decline. Using property-level disaster risk, treatment, listing, and sales data, we find hurricanes shift compositions of listings and sales away from risky homes. A novel analysis that focuses on listings started shortly before hurricane forecasts indicates flooded homes are nine percent less likely to sell whereas elevated homes in the broader region are 2 percent more likely to sell. Non-elevated flooded homes sell more slowly and at larger discounts. Extreme weather events can thus introduce transaction bias to price effect estimates that could help explain some of the disagreement in price effect research.
Bio:
Brigitte Roth Tran is a Senior Economist at the Federal Reserve Bank of San Francisco. Dr. Roth Tran’s research uses large datasets to examine a wide range of microeconomic and financial questions for households, firms, and local economies. Her work has shown that financial markets price in significant uncertainty for firms in the paths of hurricanes, that individual store losses due to unfavorable weather conditions on one day are large and not simply made up over time, that the 2011-2018 decline in demand for coal negatively affect household finances in Appalachia, and that U.S. natural disasters tend to boost local area incomes over the longer run in directly affected counties. Her work has been published in peer reviewed journals like the American Economic Review: Insights, the Journal of Finance, and the Journal of Financial Economics and highlighted in media outlets like the Wall Street Journal, Bloomberg, the Economist, and Forbes.
Prior to joining the Federal Reserve Bank of San Francisco, Dr. Roth Tran spent five years at the Board of Governors of the Federal Reserve System in Washington, D.C., where she forecast residential and nonresidential investment. She also had significant work experience in the private and nonprofit sectors prior to attending graduate school. Dr. Roth Tran earned her Bachelors of Science in economics at Caltech and PhD in economics at UC San Diego, where she took courses at the Scripps Institution of Oceanography as an NSF IGERT Fellow.