The Impact of Hurricane Harvey on the Housing Market will Be Tough, but Not Forever
Many of us have friends and family in the path of Harvey, or may be living and working near Houston. On Saturday, August 26, the impact of Hurricane Harvey on the housing market was the least of anyone’s concerns. But in the coming weeks, as agents reconnect with loved ones in Texas, they may face a “second storm” – deeper inventory problems in an already dry housing market. We researched the impact Hurricane Harvey is likely to have on the housing market to help agents prepare for what’s ahead.
The Power of Hurricane Harvey
Hurricane Harvey is not just another tropical storm. At it’s peak it became a Category 4, spawning more than dozen tornadoes and blowing winds up to 140 MPH, according to CNN. By 2:00 PM on Saturday, August 26, hundreds of thousands of homes had lost power. Thankfully, most of the residents in the direct path were able to evacuate in time – and many are already returning home. Unfortunately, the storm claimed at least two lives and rescue workers are actively looking for people who may be trapped or injured. The irreplaceable and tragic loss of even a single human being is infinitely more devastating than any economic impacts of this storm, and puts the real power of Harvey in perspective. Click here to join Discover Publications in supporting the victims of Harvey.
Property Damage from Hurricane Harvey
Property damage from Hurricane Harvey is already widespread and expected to continue. Tom Beal, a meteorologist in Corpus Christi, reported to CNN about the structural damage he was seeing to buildings in Rockport, Aransas Pass, and Port Aransas. It doesn’t end there – the impact of Hurricane Harvey on the housing market, especially in the path of the storm, is already apparent. CNN reports:
“There were more than a dozen tornadoes spawned by the storm hit Texas on Saturday. The Houston office of the National Weather Service reported 12 twisters in its area. Harris County Sheriff Ed Gonzalez said deputies saw a possible tornado near Cypress Fairbanks, just outside Houston… ‘We’re seeing extensive damage to properties,’ he said. (Full article here, CNN)
It’s too early to predict the final toll, and we found three widely ranging predictions. Marketwatch forecasts $1-2 Billion in damage, but this seems low. ABC News listed the historical impact of storms by category, and provided an educated guess of roughly $15 Billion. This is based on the impact of similar storms in similar regions. CNN Money reports the damage could reach as much as $40 Billion. That’s a lot of real estate. What does this tell us about the impact of Hurricane Harvey on the housing market?
The Impact of Hurricane Harvey on the Housing Market
The impact of Hurricane Harvey on the housing market, especially in the most affected regions of Corpus Christi, Houston, Galveston, Victoria, and others, will be immediately felt. Hurricanes Charley, Francis, and Jeanne occurred over a decade ago, when the national housing market was nearing its peak. Home sales were reduced by over 20% overnight. Homeowners took their houses off the market to repair damage, and many soon-to-be sellers delayed listing. In each of theses cases, however, home prices climbed up a full 25% within four months.
Hurricane Harvey is blowing through a very different market, however, than Charley and Jean. In 2004, prices were high but inventory wasn’t so tight. Today, in many parts of southeast Texas, the demand for mid-priced homes already far outweighs the supply. Interestingly, we should expect to see an inverse effect on home prices. With even tighter inventory, homes that are suitable to sell after the storm will likely demand an even higher price than before. And as many homeowners look to relocate, the impact of Hurricane Harvey on the housing market will stretch far beyond the areas directly affected by the storm.
The 4-Month Positive Impact of Hurricane Harvey on the Housing Market
The good news? The market will recover relatively quickly… and then some. If we look back to previous storms, even the infamous Katrina, a definite pattern emerges. In just about every major case, it took an average of four months for prices to stabilize and inventory to catch up. As insurance money flows in, homes end up in better shape and homes that may have been previously unmarketable become hot commodities. New kitchens, roofs, flooring, and siding abound. These improvements may also help to push out some of the larger, dated homes that homeowners had been hesitant to list (and also hesitant to improve on their own dime).
We do not mean to say there is opportunity in Hurricane Harvey. This storm is a devastating blow to so many families, a blow that no amount of insurance can undo. We have direct ties – familial and professional – to the wonderful people uprooted by this disaster. Throughout the coming weeks we will be sending our thoughts, prayers, and donations to the victims of Harvey, and make ourselves available to our friends in the real estate community concerned about how this tragedy might further complicate their livelihoods. The bottom line: it will be rough, but it will get better.