In the immediate aftermath of Hurricane Harvey, and ahead of the huge potential for danger and destruction still to come from Hurricane Irma, there remains much uncertainty and fear about estimated and actual damage to housing markets in Texas and the Southeast. But based on past and present research, there are several things we can state with confidence about both situations, and more about which we can make educated assumptions.
As more data comes in and official reports are finalized, we will update these facts and figures wherever possible. But here’s what we know now:
Over the past roughly two decades, a number of destructive hurricanes have had a costly immediate impact on a huge number of U.S. coastal communities – from Hurricane Andrew, through Katrina, Sandy and most recently Harvey. 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.
Our research shows that properties near the coast – those most likely to get battered by the wind, rain and storm surges wrought by large hurricanes – exhibit a consistent pattern:
The bottom line: Homebuyers love coastal areas. The attraction of living near the sea is too strong to dampen interest simply because of a few hurricanes here and there. Evidently, people either quickly forget the potential dangers, or they place more weight on the upsides of coastal living. Whether or not this holds true in the wake of Harvey and Irma remains to be seen.
Read our research on the premium placed on coastal properties – both before and after large storms.
Hurricanes pose an immediate danger, through rising seas caused by storm surges and wind-whipped high tides. But a more gradual threat is no less real and potentially much more destructive than localized, hurricane-driven flooding: The threat of rising sea levels caused by climate change.
Given growing evidence of the relationship between climate change and the strength of major hurricanes like Irma and Harvey, this threat becomes doubly important.
Some estimates suggest sea levels will rise six feet or more by the year 2100 if climate change continues unchecked. Using maps from the National Oceanic and Atmospheric Administration (NOAA), in conjunction with our database of information on more than 100 million homes nationwide, we determined which properties were at risk of being submerged (at least their ground floors) in the next century or so, and roughly what they’re currently worth.
Our research found:
Miami sits squarely in the projected path of Hurricane Irma, which is expected to bring a significant storm surge that could easily exceed six feet or more. For reference, in Miami, a sea level rise of six feet could flood almost 33,000 homes, worth a combined total of $16 billion (as of summer 2016).
Based on very preliminary flood data coming out of Hurricane Harvey’s immediate impact zone in Southeast Texas, combined with home value information from our database, we can make some initial estimates about the amount of housing damage sustained in the region.
We examined properties in six metro areas directly impacted by Harvey – Bay City, Corpus Christi, El Campo, Houston, Victoria and Port Lavaca. We found:
Before Hurricane Harvey, Houston and much of Southeast Texas stood out as a place with affordable housing and strong job growth. While much of the country was in recession, the labor market in and around Houston, in particular, was resilient as the city consolidated its historic role as a hub for the booming oil industry. Although the region’s labor and housing markets have slowed since oil prices first dipped in 2015, Houston has retained its status as one of the most affordable large housing markets in the country.
Housing has historically been affordable in the area because it’s relatively easy to build homes there. Unfortunately, a lot of those homes were built in areas vulnerable to flooding, both on the coasts and from rising rivers and bayous farther inland. One reason it’s so cheap to build in the area is that premiums for flood insurance haven’t always been properly calibrated to the actual risk of building there. Development can look a lot cheaper if the full risk and cost of flooding isn’t added to the final price tag.
It’s 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 ahead and assessors visit damaged properties, we’ll gain a more concrete sense of how much of the region’s housing stock is salvageable. On the eve of the storm, the total value of all residential real estate in the Houston metro alone was about $380 billion – that’s 1.2 percent of the nation’s total real estate value. Rebuilding will be no easy feat.
Construction workers are in short supply in all areas of the country, which means regional building costs could increase meaningfully. If the experience of New Orleans in the aftermath of Hurricane Katrina is any guide, the Houston area by itself could expect an influx of more than 20,000 construction workers over the next 10 to 12 months as rebuilding gets underway. The combination of lost homes and an influx of workers brought in to help rebuild could push up housing costs in those parts of the state that were spared from substantial damage.