Perceived Environmental Risk, Media, and Residential Sales Prices

Abstract

We investigate the relationship of homebuyer risk perception and sales prices over different development stages of an environmental hazard (underground natural gas transmission pipeline) characterized by no sensory impact on homes, no accidents, and a relatively low actual risk of fatal explosions. We also investigate the moderating effect of media coverage of unrelated fatal pipeline explosions on this relationship. Using a hedonic pricing model, we find that (1) media coverage moderates the relationship of pipeline proximity (perceived risk) and sales prices in the pipeline construction phase and (2) higher perceived risk reduces sales prices once the pipeline is in operation.