The Impact Hurricanes Have on Real Estate

The Impact Hurricanes Have on Real Estate

The 2018 hurricane season officially began on June 1st, and it’s forecasted to be a busy one. According to Colorado State University, this hurricane season will see 14 named storms and six hurricanes, two of which will be major hurricanes. However, even before the official start of this year’s hurricane season, a subtropical storm–Alberto–made its way through the Gulf of Mexico in May, causing high winds and heavy rains across the coastal states.

With such an early start to this year’s hurricane season, many residents are worried about what this could mean for the rest of the season. Additionally, with over $282 billion in damages from last year’s hurricane season, many homeowners are concerned about the consequences that could arise by living on the Atlantic coast and near the Gulf.

Hurricanes and Real Estate in the South

With hurricane seasons progressively getting worse, many potential buyers are wondering if owning a home in the south is a wise investment. However, against popular belief, hurricanes actually have the opposite effect on real estate markets. Many reports show that housing market prices typically go up in the event of hurricane damages. Though it seems counterintuitive, natural disasters have a positive impact on real estate markets. Therefore, owning property that’s near the Atlantic Ocean and the Gulf can be profitable for real estate investors. In a study executed by the Federal Reserve Bank of Dallas, researchers looked at the impact hurricanes had on the housing market in US cities. In their findings, they explained, “Typical hurricane strike raises house prices for a number of years, with a maximum effect between 3% and 4% three years after occurrences” (source). However, as there is a long-term positive effect on the real estate market after a natural disaster, reports also show a reduction in the frequency of home sales.

Additionally, homes that are for sale immediately after a storm are usually sold at a much lower price. In Florida, expert analysts reported a 50% drop in the number of pending home sales. However, another study conducted by Colorado State University claimed that this side of hurricane/real estate aftermath is short-lived. In their studies, they found that two months after the flooding caused by Hurricane Harvey in Texas, approximately 31% of residential neighborhoods saw an increase in median home prices.

The Renting Market

The real estate market isn’t the only market that’s been impacted (both positively and negatively) by the aftermath of natural disasters; the renter’s market can also be affected. In a study that primarily focused on the effects of pre-Hurricane Katrina and post-Hurricane Katrina, New Orleans experienced a significant increase in rents after the deadly Hurricane Katrina. However, this is an effect that isn’t simply limited to Katrina; in many areas affected by a natural disaster, a slight increase in renting was recorded after the passing of the hurricane.

 

Although the costs of repairing and rebuilding are at the forefront of many potential buyers minds, evidence shows the investment opportunities that can arise after a natural disaster.

 

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