How Do Hurricanes Affect the Real Estate Market?

Current Events and Real Estate

With hurricanes bombarding the Gulf Coast and Southeastern United States, many people are losing their homes. Recent estimates by the Federal Emergency Management Agency (FEMA) suggest that over 100,000 properties were affected by Hurricane Harvey.[1] This rapid dip in housing stock will cause a steep hike in real home prices -- but the good news is that this uptick will likely be brief.

Historically, economic and property damage from hurricanes is short-lived

This trend is most readily seen by looking at the rebound of Louisiana after Hurricane Katrina, which slashed housing stock in Orleans Parish by around 50% in 2005. Housing prices jumped by 17% immediately after the storm, but quickly fell back to normal levels by mid-2007. Despite suffering through one of the costliest and most devastating hurricanes in U.S. history, Orleans Parish housing stock started to recover just 4 years after the storm made landfall. By 2010, housing stock had stabilized, albeit at slightly lower levels.

Houston, which was on course for a record-breaking year economically[2], will likely recover faster and more readily than Orleans Parish. The city could even see a small economic bump upward from the influx of construction workers and related rebuilding efforts, as was the case for Hurricane Andrew in 1992, Hurricane Katrina in 2005, and Superstorm Sandy in 2012.

Florida real estate markets, meanwhile, seem mostly immune from the effects of Hurricane Irma. Homeowners in the Sunshine State shrugged off Irma with a "business-as-usual" attitude; commenting on the hurricane, Jeff Soffer, billionaire real estate developer and CEO of Turnberry Associates, said, "I don't think real estate prices are going to get affected. Ultimately people want to be in Florida."[3]

This shouldn't come as a surprise, since seaside properties are perpetually in demand. Even in the wake of hurricanes, research suggests that coastal real estate retains its premium value.[4]

Flood insurance for future storms should be the main concern

Although Houston and Florida seem to be on-track for healthy recoveries, homeowners could see prohibitively high flood insurance moving forward. The Biggert-Waters Flood Insurance Reform Act, passed in 2012, was intended to adjust flood insurance rates to levels that reflected the actual risk of flooding. However, the law was mitigated by an extension of the National Flood Insurance Program out to September 30, 2017 and a second extension out to December 30th.[5]. Unless another extension is enacted before the end of 2017, flood insurance could skyrocket for those living in flood prone areas.

Our sympathies are with those impacted by Hurricanes Harvey and Irma.

  1. Fleming, Mark. “Here's what Hurricane Katrina can teach us about Harvey's impact on Houston's housing market.” Business Insider, Business Insider, 12 Sept. 2017, Accessed 19 Sept. 2017. ↩︎

  2. Brown, Steve. “Hurricane Harvey will dampen Texas' real estate market for the rest of 2017.” Dallas News, 8 Sept. 2017, Accessed 19 Sept. 2017. ↩︎

  3. Fox, Michelle. “Hurricane Irma won't affect Florida real estate prices, says billionaire developer.” CNBC, CNBC, 11 Sept. 2017, Accessed 19 Sept. 2017. ↩︎

  4. Gudell, Svenja. “Hurricanes Harvey & Irma: What They Could Mean for Housing.” Forbes, Forbes Magazine, 7 Sept. 2017, Accessed 19 Sept. 2017. ↩︎

  5. Martin, Susan Taylor. “Will Hurricane Irma slow Tampa Bay's booming real estate market?”, 14 Sept. 2017, Accessed 19 Sept. 2017. ↩︎

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About James Royce Threadgill

Founder of UbiquiTools LLC. Coder/creator of REALToDo real estate CRM. Chemical engineer that previously worked in gene therapy and green plastics before founding UbiquiTools.