In the immediate aftermath of both Hurricane Irma and Harvey remains much uncertainty and fear about estimated and actual damage to the housing market. There are, however, several things we can state with confidence about both situations and more which we can make educated assumptions.
Our Love of the Ocean
Over the past 2 decades, several destructive hurricanes have made their way through coastal communities in the U.S. From Hurricane Andrew, Katrina, Sandy, Harvey, and most recently Irma. While the immediate impact on housing is immense and often runs in the billions of dollars’ worth of damage, the lasting impact of these kinds of storms on local housing markets is surprisingly minimal.
The properties on the coast, which are the most likely to take the worst of the the storm, exhibit a consistent pattern:
• They command a significant premium over properties located farther inland.
• They retain that premium even after the danger posed by these storms has become obvious
Homebuyers love the coast. The attraction of living near the ocean is too strong to dampen interest simply because of a few hurricanes. People either quickly forget the potential danger or place more weight on the upsides of coastal living.
The projected path for Hurricane Irma changed pretty much every day leading up to Sunday night. Originally, the path was going straight up the east coast of Florida, however, the eye of the storm ended up going straight through Lakeland. This caused many trees and limbs to fall, along with fencing, traffic lights and signs. Overall the storm damage was minimal compared to what the storm was supposed to be. Hurricane Irma hit Lakeland head-on as a Cat. 2 hurricane, which caused us to have sustained wind speeds of 80-100 mph. Over all the damage and electricity should all be restored and fixed within 2 weeks. This prevents these damages causing long-term effects to the housing market here in the Lakeland area.
The hardest hit areas were the islands and the Caribbean, which was hit with a Cat. 5 and South Florida which was hit by a Cat. 4/3 hurricane. These areas sustained the most damage but like we mentioned before, the love people have for the ocean will keep drawing them back to the coast.
Based on very preliminary flood data coming out of Hurricane Harvey’s immediate impact zone in South Texas, combined with home value information we can make some initial estimates about the amount of housing damage sustained in the region.
The six metro areas directly impacted by Harvey were: Bay City, Corpus Christi, El Campo, Houston, Victoria, and Port Lavaca. According to Forbes.com:
• The estimated total value of all flooded homes in the six metro areas analyzed is roughly $32.1 billion, with the bulk of that coming from the Houston area ($26.3 billion).
• In four of the six metro areas, the median value of flooded properties was higher than the median value of non-flooded properties. (Victoria and Port Lavaca)
• In four of the six metros examined, the smallest share of properties flooded was in the lowest price/value range (Victoria and Port Lavaca)
• Victoria and Port Lavaca were the two hardest hit markets in terms of total share of local home flooded
It is too soon to say what hurricane Harvey’s full impact on the Houston housing market and surrounding areas will be. As insurance claims are filed in the weeks and months to come. On the eve of the storm, the total value of all residential real estate in the Houston metro alone was about $380 billion, which is 1.2% of the nation’s total real estate value. Rebuilding will be no easy feat.