Is a FORTIFIED Home a Good Investment?

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Abstract
We estimate the effect on sales price of a FORTIFIED Home designation for residential properties in two coastal Alabama counties. Our empirical strategy is to approximate an experiment using matching and hedonic regression with a rich set of property characteristics to develop a reasonable counterfactual. Our data, which span the years 2012-2019, come from three sources: property transaction and characteristics data come from the Zillow Transaction and Assessment Dataset (ZTRAX) ; FORTIFIED Homes designations come from the Insurance Institute for Business and Home Safety (IBHS); and digital flood zone data come from the Federal Emergency Management Agency (FEMA) National Flood Hazard Layer (NFHL). We find that a FORTIFIED Gold designation increases the mean sales price of newly-constructed homes by up to 8%. We find no significant price effect of FORTIFIED Gold designation on existing homes, and find no significant price effect of FORTIFIED Roof/Bronze designation. Nevertheless, our benefit-cost analysis indicates that a FORTIFIED designation can result in a net gain for some homeowners when insurance discounts and avoided damages are accounted for.
Abstract ID:
bbs20403
Type of Presentation
Mississippi State University
Mississippi State University
Mississippi State Univeristy
University of South Alabama
Mississippi State University

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