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Scientists say sea levels are rising, and a number of people living in coastal properties consistently underestimate their risk of experiencing flooding. The indifferent attitude could put the housing market at extreme risk, causing a housing bubble that could devastate people's life savings, says Sophie Yeo for CityLab.

A recent paper by economists Laura Bakkensen, of the University of Arizona, and Lint Barrage, of Brown University took a deep dive into this topic.

In a perfectly rational world, the risk posed by an encroaching ocean would be included in the price when you bought a property. After all, only a steep discount could persuade a sensible person to buy a property that might be washed away within 10 years. But humans, apparently, are not all that rational. Despite clear evidence of rising global temperatures, over a third of Americans don't believe that climate change is happening, according to a recent poll by Gallup. Only 45 percent think that it will pose a serious threat in their lifetime. Most significantly, if you live by the coast, you're likely to be less—not more—worried about sea-level rise and flooding than those who live inland, according to Bakkensen and Barrage's research. The two economists undertook a door-to-door survey of properties throughout Rhode Island and found that 40 percent of flood zone respondents were "not at all" worried about flooding in the next 10 years, even though the average property in their sample has a one-in-seven chance of flooding annually after just one foot of sea level rise.

The beliefs could also cause house prices along the coast to eventually plummet by as much as 16 percent, according to Bakkensen and Barrage, depending on how many flood risk "optimists" are willing to buy these properties in the near future. That's only slightly less than the 19 percent drop in house prices during the 2007–09 Great Recession. These drops in value will occur as a series of shocks over time, as homeowners are forced to hastily re-evaluate their flawed beliefs: Unsurprisingly, the paper found that people often become convinced they live in a flood zone after they experience a flood firsthand. Bakkensen and Barrage's study finds that people will correct their views over time, as flooding becomes too regular to ignore—or that better policies will force homeowners to start pricing in this risk, regardless of their personal views.

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