Capitalizing Risk and Regulation: Sequential Shocks in Florida's Condominium Market

Abstract

Housing markets capitalize new information regarding future risks and ownership costs, yet little is known about how markets respond when sequential shocks differ fundamentally in nature. This study examines how Florida's condominium market capitalized two temporally adjacent but distinct shocks: the unexpected collapse of the Surfside condominium building, which revised perceptions of structural risk, and the subsequent enactment of Senate Bill 4-D (SB4D), which introduced mandatory milestone inspections, Structural Integrity Reserve Studies (SIRS), reserve funding requirements, and related compliance obligations that increased anticipated future ownership costs. Using more than one million condominium transactions across Florida between 2020 and 2024, the study employs a three-period difference-in-differences design, complemented by monthly event-study analyses, to distinguish the initial capitalization following the Surfside information shock from the subsequent capitalization observed after SB4D. Condominium sales prices declined significantly following the Surfside collapse and experienced an additional, statistically significant decline subsequent to SB4D. Monthly event-study estimates show two distinct phases of price adjustment corresponding closely to the sequential shocks. Heterogeneous analyses indicate that capitalization varied systematically across building age and condominium value but exhibited comparatively modest and less systematic variation across coastal proximity. The findings demonstrate that housing markets capitalize revised perceptions of future risk and anticipated future ownership costs through distinct economic channels. The magnitude of capitalization depends on the extent to which each sequential shock revises buyers' prior assessments, rather than on the underlying level of risk or ownership costs alone.