The effects of Hurricane Harvey on the Houston Real Estate Market

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Vhara Salvadori

After being asked many times about Realtor general opinion on the realty market as a result of the effects of Hurricane Harvey, I have listened, read, opined, and learned from other Realtors and articles on potential impacts and I've summarized below opinions, stats, and predictions that may help provide some insight.  One thing is certain, there will be short and long term effects.  What those will be is difficult to say with absolute certainty but the experience and stats from similar events may help us predict the next few months.  

Those affected will likely need approx 2-3 months to work out insurance and figure out what to do next (rebuild, repair, or move) so 4Q2017 will likely be a bad one for the market. 

The first question a buyer should now ask is "how high did the water come up".  Those homes that didn't flood are now considered a high commodity and going forward Houston buyers will only want to buy homes that didn't flood, so the fact if a home flooded or not will be driving factor affecting supply and demand in the future Houston realty market.

We mustn't forget this wasn't a flood that hit a few homes in a neighborhood or limited to flood zones like previous storms, the effects of this hurricane wiped out entire neighborhoods across the city and damage was increased by the controlled release of water from the reservoir on Houston's west side.  Many of those neighborhoods had never experienced rising water before, and even though it may be difficult to rationalize we must remember those homes were sacrificed to reduce the imminent risk of greater catastrophic destruction across the city, and potential loss of life. 

Summary impacts:

  1. Harvey resulted in the affordable apartment rental market going from an over supply to a no availability status, and the same for the rental market as a whole. This may last for approximately 6-12 months.
  2. As a result of the Oil & Gas downturn, spec building has been limited so there's less inventory than usual.
  3. Residential lot prices will probably go down for 9-15 months.  Many people May take their insurance money and not rebuild.  For those who want to build this will be good news because the inventory of A+ lots has been limited and prices may now be a bit lower (don't have to settle for a B- location).
  4. Flood insurance is likely to sky rocket.  Homes previously not required to buy it may end up being required to (location dependent), or owners may simply want to buy it now ... just in case. The cost of that flood insurance will now be a consideration when buying a home, and may be used in mortgage applications and calcs.
  5. There will be a shortage of construction companies and general construction workers, and so expect remodeling/building costs to increase.
  6. Short term (approx 1-2 years) buyers will only want homes that did not flood
  7. If your home did not flood, it's likely when the market returns your value will go up approx 15-20%. 
  8. Homes that have previously flooded probably will have flooded 3 times in the past 3 years, and these homes will likely see a significant drop in value.
  9. Homes that had never flooded before Harvey, until Harvey, will likely rebound within a couple of years.
  10. Finally, long term (approx 3+ years) the flood will be a fading memory and people will feel it wont happen again......We all hope they're right! 

 Please contact me if you'd like to buy or sell a Houston area home, or if you'd like more information on your own market area.  

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Post Category: Home Buying, Home Selling, Housing Market

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Disclaimer: The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the HRIS.

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