Housing Beyond the Path of Destruction: Market and Neighborhood Spillovers from a St. Louis Tornado (with Jeffrey P. Cohen and Michelle Wickman)
While the economic toll of natural disasters is typically measured by direct physical destruction, this paper investigates the severe neighborhood spillovers imposed on undamaged properties. Exploiting the highly localized damage corridor of the May 2025 St. Louis tornado, we evaluate its causal impact on housing prices, transaction volume, and vacancies, for undamaged residential parcels. Using a difference-in-differences framework, we identify a dual-channel mechanism of neighborhood distress. First, through a rapid capitalization channel, undamaged homes within 250 meters of the damage path suffered transaction price declines of 20 percent or more relative to control properties. This discount is highly localized, concentrated primarily within the first 100 meters. Second, utilizing probabilistic vacancy data, we uncover a delayed displacement channel. Specifically, while price adjustments were rapid, significant spikes in new property vacancies did not emerge until several months post-disaster. While the relative price spillovers were uniform across demographic groups, the absolute burden fell heavily on low-income neighborhoods. Finally, this paper makes a novel contribution by isolating a compounding institutional shock from the tornado-induced closure of two local elementary schools. Applying Inverse Probability Weighting (IPW) to balance school attendance zones, we demonstrate that the destruction of institutional anchors may amplify the negative physical externalities of the storm. Ultimately, our findings may imply that disaster recovery policies extending beyond rebuilding damaged structures to include targeted "buffer zone" stabilization and institutional restoration could prevent post-disaster vacancy contagion and urban blight.