How will people adapt to rising temperatures and extreme weather events, how costly will these adaptations be, and will they be undertaken before it is too late? In this work, I test the hypothesis that large flood events shock nearby residents and affect their future real estate purchase habits. I leverage the natural experiment created by flood disasters in the United States and focus on real estate markets, where transactions data is readily available, stakes are high, and choices differ significantly in terms of risk exposure. Drawing on data from over four million Florida real estate transactions between 2005 and 2017, I use negative binomial count models and find evidence that scarred buyers who experienced disasters in their previous homes alter their behavior when they enter Florida housing markets, shifting purchases away from coastal properties and retreating to larger properties inland. The effects are sharp but transient, disappearing and even reversing in the years after a shock. I then develop a residential sorting model that can estimate the quantitative effect of disaster shock on individual demand for housing near the water, using a genetic matching procedure to find a group of non-scarred buyers that serves as a control group. I employ this model to measure the behavioral welfare implications of transient shifts in preferences or beliefs, and find suggestive evidence that the informational content of storm exposure is worth several hundred dollars to shocked buyers. Finally, I estimate hedonic models which show that a large influx of scarred buyers to a given Florida market is powerful enough to decrease the amenity value of water proximity in equilibrium by up to 5% of total home value, with potentially huge implications for coastal housing markets.

Prior research has documented a tendency for insurance demand to rise abruptly in the aftermath of natural disasters. This may be attributable in part to the information shock that a disaster represents. Understanding how beliefs about risk evolve is of first-order importance for projecting climate adaptation in coming decades. Using a three-wave survey of 959 residents of flood-prone coastal counties in the southeastern United States, including 430 for whom we have longitudinal data, we study how individuals’ beliefs evolve after two types of informational shocks about future local flooding risk: viewing flood maps, and experiencing a local flooding disaster. In the first wave of the survey, we randomly expose a portion of the respondents to U.S. government flood risk maps covering their neighborhoods. We find that, on average, exposure to maps causes respondents to update their beliefs of their homes’ flood risk downward substantially (40%, 95% CI 23%-54%) and reduces their reported level of worry. We also find evidence that map exposure differentially affects respondents based on their risk factors, suggesting that maps help to refine beliefs. We then leverage the natural experiment created by differential flood exposure during the hurricane seasons of 2017 and 2018, the latter of which fell between the initial wave of our survey and two follow-up waves. We find that flood disasters systematically increase flood concern in affected counties, as expected, although the finding is not robust to the inclusion of extreme outliers. More surprisingly, we find that those who experienced a flood before Wave 1 saw greater increases in concern between waves than those who did not. This latter finding does not match a simple theory of belief upating and suggest an involved updating process that may complicate climate adaptation.