| Abstract: | ABSTRACT: The effect of a floodplain location on the market value for property is controversial, with the conventional wisdom being that buyers are myopic. Previous parametric and nonparametric statistical tests have proven inconclusive in deciding the issue. Herein, a theoretical model, that of hedonic price indexes, is posited and tested, using housing sales characteristics data obtained from a Multi-List Service cooperative. This study suggests that home buyers do adjust the purchase price for houses within a floodplain, and this amounts to, on average, just over 12 percent. The data are from a small midwestern town in which the last severe flooding occurred a decade ago. |
