Climate change impacts threaten the stability of the US housing market. In response to growing concerns that increasing costs of flooding are not fully captured in property values, we quantify the magnitude of unpriced flood risk in the housing market by comparing the empirical and economically efficient prices for properties at risk. We find that residential properties exposed to flood risk are overvalued by US$121–US$237 billion, depending on the discount rate. In general, highly overvalued properties are concentrated in counties along the coast with no flood risk disclosure laws and where there is less concern about climate change. Low-income households are at greater risk of losing home equity from price deflation, and municipalities that are heavily reliant on property taxes for revenue are vulnerable to budgetary shortfalls. The consequences of these financial risks will depend on policy choices that influence who bears the costs of climate change.

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This paper studies the effect of short-run weather fluctuations on solar panel adoption in California. This decision appears to respond strongly to weather patterns associated with solar panel productivity: I find that customers whose sign-up for solar panels is followed by unfavorable weather are more likely to cancel their contracts. In contrast, non-residential customers are not subject to the same effect. Together, these results suggest that short-run weather conditions affect customers' valuation of solar panels. The most plausible mechanisms are psychological biases such as projection bias or a salience effect, leading the decision-maker to rely too heavily on transient conditions when predicting long-run utility. This paper is among the earliest to document evidence of behavioral anomalies in the solar market.

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