On August 27, 2017, one of the costliest hurricanes in United States history hit Texas – this was Hurricane Harvey. The hurricane itself was a category 4, with a diameter of 280 miles and winds up to 130 MPH during its first landfall. In parts of Texas, Harvey dumped upwards of 51 inches of precipitation, covering the state with 27 trillion gallons of rain. The initial shock of Harvey was devastating – the damage included unprecedented flooding and left more than 30,000 people displaced from their homes. Reports following the hurricane estimated that Harvey inflicted over $125 billion in damages.
The months following Harvey brought ongoing challenges – many individuals found themselves homeless and without their possessions. In the worst case scenarios, loved ones were lost. It has now been a year since the tragic disaster, and the real estate market seems to be turning around. What were the challenges that homeowners in Baytown were confronted with? What is the status of the market today? In this article, we will review both.
Lost Homes and Damaged Homes
Almost all homes in the Baytown market were affected by Harvey – Given the combination of water damage and wind destruction, individuals were lucky if their homes were still habitable after the hurricane. One unfortunate incident related to this disaster was the lack of homeowners insurance – many owners lacked coverage on their assets. In the state of Texas, homeowners insurance does not typically cover the damages such as those seen in natural disasters, and additional policies must be purchased for protection (for more information, visit “A Beginners Guide To Ensure Every Homeowner”).
If the homeowner had insurance, the process to renovating the home was still long and tiresome – especially in the midst of emotional havoc. To receive an assessment from an insurance company generally took 2-3 months and was followed by months of renovations. In certain areas, certain neighborhoods were wiped out, requiring homeowners to start from scratch, which meant they had to purchase a new home and new interiors. Due to the lost memorabilia, this process has been challenging for many.
Impact on The Market
With the damages came changes to the local real estate market. But what were these changes that the market experienced?
- Rent for apartments has increased. Due to families relocating during renovations, demand for rental units increased. With high demand came an increase in prices. Another factor that affects this is the expectation that those with insurance will be covered while they are out of the home – motivating investors to increase rental rates and take advantage of the insurance companies.
- Current buyers are only looking for homes that did not flood. New homeowners do not want to buy a home that experienced severe damage – this creates an uneasy energy surrounding the home. Homeowners are looking for newly developed residential homes that were built in the last year. With these homes in high demand, the value of new construction is driven up and that of older homes is driven down.
- Homes that were flooded or have experienced a flood in the past have dropped significantly in value. If this was a home’s second time weathering a storm, the homeowner can almost be guaranteed to be losing money on the home. Not only are homebuyers deterred from purchasing these homes, but insurance companies are weary about coverage. In general, these homes are at the end of their lifespan. One way around this, however, is to do a complete renovation – unfortunately, this is an expensive process that is not generally covered by an insurance company. Also, it takes much capital on the front end to complete.
- Flood insurance skyrocketed. Insurance companies are businesses, and at the end of the day, they are looking to make a profit. With natural disasters such as Hurricane Harvey, they are looking to protect themselves for the future. Insurance companies are raising prices on policies, especially for those homes located in coastal markets.
- Residential lot prices dropped. With homes that were completed ruined, insurance companies were providing checks for homeowners to rebuild. However, this process is long and requires the time of a dedicated individual –many of those who went through the disaster are still not in a state of mind to pursue the task of rebuilding a home. With such a lack of motivation, and the influx in available residential lots, the price per square foot is dropping.
Following such a devastating disaster, communities can take years to recover. Not only are people left with an emotional hole, but homeowners are also left with unwanted responsibilities. If you are a homeowner who has experienced the aftermath of Hurricane Harvey and are looking for a solution to your home problems, contact us; we can help.