Returns to Ocean-Bordering Properties over the Housing Cycle

Abstract

Abstract We estimate a hedonic pricing model controlling directly for a property's proximity to the ocean and find a significant and sustained premium accruing to transacted prices for ocean-bordering properties. We find on average that properties that border the ocean earn a 74% premium, even after controlling for distance, but the magnitude of the border premium varies over time. Furthermore, the border premium is positively related to home prices and has been declining along with home prices from a peak value of 119% in late 2007, early 2008. We also find evidence that ocean-affected properties are transacting much less frequently, as the share of these properties among all transactions has been declining since 2005.