In the wake of several natural disasters wreaking havoc throughout California and across the United States, many homeowners are left wondering how these catastrophes will affect their property value. This article by Forbes shares research on the repercussions of the recent fires, foods and hurricanes throughout the country…
The Natural Disasters Of 2017’s Impact On The Housing Market Will Surprise You
Realtor.com recently released research and analysis on the impact of 2017’s natural disasters on the country’s housing market. According to realtor.com most areas saw a delay in– or disruption–to an estimated 18 to 32 percent of home sales in the month of the disaster.
“We compiled data on seven different events including California wildfires and Hurricanes Harvey and Irma,” explains Javier Vivas, director of economic research for realtor.com. “We looked at when an event hits, what does it look like with online searches for homes? We found that it did hinder sales and demand in those local markets. About one in four sales were delayed or disrupted.”
The information from realtor.com is based on “expected sales or page views, anticipated sales or page views for the month if no disaster occurred. Estimates are based on previous month’s actuals and account for seasonality.”
Here’s realtor.com’s research on four events:
Southern California Wildfires: December sales not yet available. Realtor.com page views were 2 percent lower than expected.
Northern California Wildfires: Approximately 900 lost home sales, sales 18 percent lower than expected. Views were 2% lower than expected.
Hurricane Irma: Approximately 9,700 lost sales, sales 32 percent lower than expected. Views were 15 percent lower than expected.
Hurricane Harvey: Approximately 3,700 lost sales, sales 24 percent lower than expected. Views were 6 percent lower than expected.
Thomas Knapp, associate professor of entrepreneurship and academic director of the Master of Science in Entrepreneurship and Innovation program at USC Marshall School of Business, has these thoughts: “Short-term, there is no question impact includes shrinking inventory and sudden higher demand on rental properties with rising rent prices. For the long-term, the impact doesn’t seem to last. People know the inherent risk of buying homes in areas prone to wildfires and hurricanes and continue to buy there.”
Older home buyers often take note when choosing a new home location post disaster. “Following Hurricane Irma, several 55+ buyers from coastal areas of Florida became interested in our Del Webb property located in Ocala,” said Sean Strickler, president of PulteGroup’s West Florida division. “At a time of year when sales on that project would typically be slower, we had many more buyers and prospects looking to move to the central part of the state where it’s perceived to be safer from storms compared to coastal areas.”
Post disaster, the topic of construction standards and materials often come into play. According to Michael Neal, senior economist at the National Association of Home Builders, “the cost of these disasters will present a problem for builders and insurers in hurricane areas like Texas and Florida. Looking at construction materials is also an issue.”
Late last August, Houston was devastated by Hurricane Harvey, causing an estimated $180 billion in damage according to various news sources. Fast forward five months later. The residential market is booming according to Nancy Almodovar, President & CEO of Nan & Co. Properties/Christie’s International Real Estate in Houston, “People are getting their insurance money and looking for new homes. We are very busy with in the $750,000 and up market.”
Moving west to Ventura, CA where in December the Thomas fire (ranked as the largest wildfire in to hit California) “burned approximately 520 properties. Many of which were in upscale neighborhoods, and many additional homes have smoke damage requiring the owners to move out for an extended period of time,” said Liz Donnelly, Associate at RE/MAX Gold Coast (Ventura, CA).
The short-term impact is a surprise. “Since the fires, many who have been affected have chosen to buy instead of rent while they rebuild. There are a few reasons for this, but most notably because rent prices have gone up since the fires,” Donnelly observes.
Drew Uher, CEO of HomeLight.com, a digital company connecting buyers with real estate agents through its extensive database shared an anecdote speaking to the tight Northern California market. “I personally had good friends who were in escrow to buy a home in Santa Rosa when the fires happened. They were set to close in about two weeks when the fire ravaged their block, burning every home to the ground except theirs.
“The owner wanted them to pay an extra $100,000 for damage related to smoke, etc.,” he continued. “They decided not to go through with the transaction. However, the sellers quickly found other buyers who were not only willing to pay the repair costs, but also paid a 20% higher purchase price.”
Natural Disasters will continue, causing larger dollar amounts in damage as home prices rise around the country.