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Land Markets & Terrorism: Uncovering Perceptions of Risk by Examining Land Price Changes Following 9/11

Christian L. Redfearn
This paper addresses the market's perception of risk from terrorism by examining the prices of single-family homes before and after the terrorist attacks on September 11th, 2001. In the wake of the attacks, government officials responded by raising security at sites considered to be likely targets of future attacks. In the greater Los Angeles metropolitan area, these included the Ports of Long Beach and Los Angeles, Los Angeles International airport, and several local civic centers, among others. The skyscrapers of downtown Los Angeles were also thought to be potential targets. It is clear that some markets internalized these actions as representative of the real risk of repeat attacks (e.g. a pronounced increase in terrorism insurance premiums for commercial properties and "trophy" properties). It is not clear, however, that the consumers have similarly altered their behavior. Where surveys indicate that terrorism is seen as a genuine risk, the actions of home buyers in the L.A. Basin indicate otherwise: the effects of 9/11 on residential markets have been insignificant in the areas surrounding potential targets. Results suggest that the perceived risk of harm from terrorism is in fact unchanged in the wake of the attacks on September 11th, 2001.