The Effect of Loma Prieta Earthquake on the Bay Area Housingand Rental Markets

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The primary purpose of this project is to determine the extent to which new information about earthquake risks has altered the Bay Area housing market. We are most interested in determining how much, if any, the value of unreinforced residential properties has declined as a result of: 1) the earthquake, 2) anticipated revisions to the region's building codes and 3) public notification that a structure is seismically unsafe (as required in Palo Alto). A variation of the hedonic pricing model will be used to measure the Bay Area's willingness to pay for seismic safety. Repeat sales data obtained from the Society of Real Estate Appraisers will be analyzed to isolate the effects of risks and regulations on market values. The results will show: 1) the effects of soils and structural deficiencies on property values; 2) whether the costs of improving seismic safety can be recouped by the property owner; 3) the likelihood that property owners would abandon or convert rental properties rather than comply with the revised code; and 4) the extent to which policies designed to induce voluntary compliance, such as those in place in Palo Alto, have produced the appropriate market signals.