The Roof is on Fire: Wildfires' Effect on Housing Prices

Abstract

Regression analyses have been commonly applied to studying the relationships between wildfires and housing prices in local markets. My study conducts a regression analysis on a panel of local markets using county-level data. It contributes to climate and housing literature by estimating the impact of wildfires on housing prices across the Western United States using a robust least squares regression. Most models estimate wildfire effects on housing prices using direct data from wildfire activities or acres burned due to wildfire as their variables of interest. Wildfire activity data is not easily accessible on the county-level; thus, this model utilizes average annual maximum temperatures to measure changes in climate over time which exacerbate and contribute to more frequent wildfire activities. (Westerling et al., 2007). My study finds that as the average maximum temperature increases within a county, the housing prices will generally decrease in value. The results of these effects are found to be statistically significant. Specifically, one percentage point increase in the growth rate of average maximum temperature reduces the growth rate of housing sales price by an average of 0.149 percentage point. These results can provide policymakers and researchers more information about land use in wildfire-prone areas and the impact wildfires have on housing markets.