Location, Location, Inundation: Examining the Effects of Sea Level Rise on Cape May County, New Jersey, Barrier Island Real Estate

Open Access
Author:
Kelly, Dillon Patrick
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Christoph Hinkelmann, Thesis Supervisor
  • Brian Spangler Davis, Honors Advisor
Keywords:
  • Sea Level Rise
  • Real Estate
  • Inundation
  • Home Values
  • Weather Risk
  • Insurance
  • Asset Value
Abstract:
Global average sea levels have swelled over eight inches over the last 120 years, with almost three of those inches gained in the past 20 years. These rising sea levels and increased incidences of extreme weather events can have destructive effects on coastal areas, including habitat loss for animals and humans, erosion, flooding, and soil contamination. This paper examines the effects of sea level rise on residential properties in coastal Cape May County, New Jersey, an area with exposure to rising seas and climate change that could force abandonment within the next century. The paper first introduces historic trends and other factors that specifically influence Cape May County real estate’s vulnerability to current and projected future sea level rise. It discusses how coastal real estate markets around the United States are currently underpricing the potential effects of sea level rise on properties and provides intuition as to why this topic is critically important to Cape May County. Additionally, the paper examines various projections for relative sea level rise along the southern New Jersey coastline based on numerous local influences and presents theoretical sea level rise scenarios over multiple time horizons. Based on these projections and local real estate data, the paper provides hypothetical value-at-risk estimates for each municipality in coastal Cape May County at the 2030, 2050, and 2100 horizons. While vulnerability of individual properties is subjective, the study provides theoretical estimates of flood tolerance and subsequent loss in value due to “effective inundation” of properties and communities.