The effect of wildfires on house sale prices across risk zones in the western United States

Abstract

Wildfires are becoming more prevalent and destructive in the Western United States, especially as residential development expands into fire-prone areas. The interaction between homeowners and wildland increases both ignition risk and structural exposure. This paper examines how housing markets respond to wildfire events and whether these responses vary across areas with different predicted risk classifications. Using repeat sales data from over 230,000 single-family house transactions linked to 276 wildfires, I estimate stacked difference-in-differences models. I compare the change in pre- and post-wildfire house sale prices between nearby and more distant houses. Models are estimated separately for houses in low and high wildfire hazard potential zones to observe whether house sale price responses differ between risk zones. The results indicate that house sale prices increase slightly, by around 1%, after wildfire exposure, with significant effects observed in low-risk zones. In high-risk zones, price responses are consistently insignificant. No clear differences in sale price responses appear between low- and high-risk zones. These findings suggest that housing markets do not reflect the risk information provided from new wildfire events. This result supports the possibility that housing markets already reflect wildfire risk, and new fire events do not provide any additional risk information.