Environmental Risk Salience and Real Estate Markets

When do risks become real to economic agents? Many environmental hazards are publicly known long before they cause damage, yet remain latent in household decisions and market prices. We study whether risk salience itself can move markets when the underlying risk is long-standing and no disaster has occurred. Our setting is the Phlegraean Fields near Naples, Italy, where a longknown volcanic and seismic hazard became highly salient during the bradyseismic crisis that began in 2023. Despite minor physical damage, no fatalities, and no upward revision of official risk, the crisis reshaped local real estate markets. We document a sharp divergence between ownership and rental markets: sale prices fall in the most exposed ownership market, while rents rise as households adjust along tenure and spatial margins. Complementary demand and supply evidence supports this interpretation. We also show that both direct physical experience and media salience matter, with media attention amplifying and extending the effects of local seismic perceptibility. Our findings suggest that markets respond not only to risk itself, but also to attention to risk.