Hurricane Katrina And The Impact On Real Estate Prices

Hurricane Katrina And The Impact On Real Estate Prices



Hurricane Katrina and​ the​ Impact On Real Estate Prices
In the​ wake of​ Hurricane Katrina’s wide path of​ destruction, the​ real estate market will be affected perhaps in​ ways not fully understood or​ expected .​
If recent hurricane recovery history holds true there will be several good things to​ come out of​ all destruction .​
Let’s hope so as​ those who live in​ the​ Delta region have suffered immensely.
In September 1989, a​ strong category 4 hurricane by the​ name of​ Hugo made landfall in​ the​ Charleston, SC area .​
Up to​ that time it​ was the​ strongest hurricane to​ hit the​ U.S .​
mainland since Camille whacked the​ Gulf coast in​ 1969 .​
The damage from Hugo was extensive with entire forests wiped out and​ fishing villages and​ seaside resorts heavily damaged .​
Dire predictions of​ the​ storm’s negative effect on the​ local economy were made .​
I​ know, because I​ was living in​ the​ nearby town of​ Goose Creek when Hugo roared through; I​ witnessed a​ sustained and​ lengthy recovery effort for​ many months thereafter.
These were some of​ my personal observations of​ that hurricane’s impact on the​ housing market:
1 .​
Housing stock destroyed.
Yes, the​ number of​ mobile homes, apartments, and​ single family homes damaged or​ destroyed by Hugo was large .​
What had been a​ fairly open pre-hurricane housing market quickly tightened up as​ the​ vacancy rate plunged to​ near zero as​ all available, undamaged property was suddenly snapped up .​
Rental rates, which had been on the​ low side, suddenly shot up and​ stayed up even as​ the​ housing stock was replenished over the​ next year .​
The net effect of​ Hugo was that older, substandard housing was replaced by more modern housing built with the​ latest building code requirements included .​
Rental rates rose accordingly to​ reflect the​ improvements .​
2 .​
Insurance payments.
Although the​ property I​ was living in​ did not sustain much damage, some of​ the​ homes in​ our neighborhood did .​
Within days of​ the​ storm’s wake insurance agents were canvassing neighborhoods, filing claims, and​ issuing checks on the​ spot .​
The quick move of​ the​ insurers allowed people to​ run out and​ make needed repairs quickly .​
Oftentimes, the​ amount of​ the​ check more than covered actual damage thereby allowing homeowners to​ make both structural and​ aesthetic improvements to​ their properties .​
These improvements were credited with fueling the​ subsequent surge in​ local home prices.
3 .​
Government assistance.
FEMA cut its teeth on Hugo .​
Originally, much criticism was levied FEMA’s way because of​ the​ agency’s slow response to​ the​ disaster .​
It took several more disasters after Hugo before FEMA's response time improved .​
Still, where private insurance companies left off, FEMA stepped in​ by cutting checks that allowed people to​ rebuild .​
Essentially, FEMA stepped in​ to​ help the​ uninsured or​ under insured recover .​
Plenty of​ homes that had been substandard before Hugo were replaced by homes that met current [and stricter] housing codes .​
The impact on the​ housing market was felt as​ this rising tide of​ support effectively lifted housing prices.
Every particular storm’s impact on a​ local economy is​ different .​
Unfortunately for​ residents in​ the​ Delta region, Katrina blew through after a​ particularly rough hurricane year in​ 2004 .​
No, FEMA isn’t broke but the​ financial stress on insurance providers cannot yet be measured .​
Unlike with Hugo, where the​ recovery effort started immediately after the​ storm left, the​ Delta region is​ still in​ rescue mode and​ waiting for​ the​ waters to​ recede .​
I​ fully expect that it’ll be weeks before any sustained recovery effort can be launched and​ even then it​ will be a​ long, drawn out process as​ insurance claims are filed, local building codes are re-examined, and​ the​ most important part – people – decide whether they want to​ rebuild in​ damaged communities or​ move away.
South Florida recovered fairly quickly after Hurricane Andrew devastated Homestead in​ 1992, but many central and​ panhandle communities in​ Florida are still reeling one year after a​ series of​ hurricanes tore up their homes in​ 2004 .​
Again, much will depend on individual families willingness to​ rebuild and​ that is​ the​ untold story lying in​ the​ wake of​ Hurricane Katrina.




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