Flooding and Liquidity on the Bayou: The Capitalization of Flood Risk into House Value and Ease-of-Sale Geoffrey K. Turnbull University of Central Florida gturnbull@bus.ucf.edu Velma Zahirovic-Herbert* University of Georgia vherbert@uga.edu Chris Mothorpe Georgia State University cmothorpe@gmail.com Abstract. The existing literature focuses on how perceived flood risk affects house value. Search theory, however, implies that flood risks will be capitalized into both house price and liquidity. This paper draws on search theory to develop an empirical approach for estimating flood risk capitalization into both price and selling time. The results show the mix of price and liquidity capitalization varies by level of flood risk as well as across housing market phases. Regardless of the specific capitalization pattern, the results illustrate that focusing solely on price without allowing for concomitant liquidity capitalization can yield estimates that understate the full impact of flood risk on house transactions. JEL Codes: Q51, R21, R31 Keywords: Flooding, flood risk, amenity, house value, liquidity *Corresponding author: Velma Zahirovic-Herbert, Department of Housing and Consumer Economics, University of Georgia, 205 Dawson Hall, 305 Sanford Drive, Athens, GA 30602; email: vherbert@uga.edu