Is the real estate market adapting to coastal risk? A case study of Folly Beach, SC

Keywords: coastal adaptation, South Carolina, beach nourishment
Abstract Type: Paper Abstract

Abstract

Many barrier islands off the United States’ eastern and gulf coasts face risks due to erosion. One way to mitigate this risk is beach nourishment, where sand is pumped onto the beach to counteract erosion and widen the beach. This is a costly process, but beach nourishment can reduce storm impacts and preserve coastal property values. Yet, does the housing market correct for overly risky properties? Folly Beach, South Carolina has a 50-year agreement (1992-2042) with the federal government to provide renourishment that began in the early 1990s. Since then, there have been five primary renourishments. However, several parts of the island are eroding faster than others. In this study, we utilize an econometric model to compare property sales data to erosion values (i.e. changes in beach width) from 2012-2021 in order to assess whether homes with more intensive erosion sell for less. We hypothesize that the real estate market is correcting for this risk and that the property values that face the highest erosion rates will sell for less. However, since the coronavirus pandemic began in 2020, real estate prices have increased, presumably negating this effect. This study will allow us to assess natural market factors and could offer insights on incentives that could be used to begin to move homes back from the coast.