Date of Award

2026

Document Type

Thesis

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Dr. Timothy Hamilton

Second Advisor

Dr. Kathy Hoke

Abstract

As natural disasters increase in frequency, the resulting rise in insurance premiums threatens a systemic housing affordability crisis across the United States. Leveraging a unique private insurance market dataset, this paper investigates the capitalization of rising premiums into home values and the resulting impact on housing affordability and underinsurance levels. Focusing on the impacts of Hurricane Florence (2018) in North Carolina, I employ a Difference-in-Differences framework to separately analyze the impacts of storm severity on property values and insurance premiums. I find that while property values decrease in proportion to storm severity, functioning as a primary risk signal, insurance premiums serve only as short-lived, delayed indicators that exhibit significant "memory decay".  This disconnect suggests that homeowners may be underestimating the long-term climate vulnerability of their property.  Ultimately, while temporal data limitations render the direct capitalization relationship inconclusive, the findings highlight a significant gap in how insurance costs signal risk, leaving homeowners susceptible to lagged affordability constraints and the compounding risks of underinsurance.

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