Spring 2008 Vol. 33, No. 1 features

Abstract: This study investigates the near-term effects of hurricanes on residential real estate. Specifically, the authors examine changes in sales price and transaction volume in U.S. Zip Codes directly hit by major hurricanes between August 2004 and October 2005. Evidence suggests changes in home prices and transaction volume in the affected Zip Codes experience a temporary dip during the first two quarters following a major hurricane, followed by a positive correction—a pattern exhibiting characteristics resembling a short-term reversal consistent with the overreaction hypothesis. Examining one full year following a hurricane, little evidence emerges suggesting a lingering effect on residential real estate prices.