Thursday, September 7, 2017
Can Harvey affect Austin's Real Estate?
A natural disaster or a catastrophe, isn’t exactly my favorite topic but we all know that these certainly affect real estate.
As we know, Hurricane Harvey affected at least 60 counties in Texas alone, at least 100,000 homes, and an estimated over one million people were displaced due to the flooding and high winds. Here in Austin, we immediately felt a gas crisis. Several gas stations ran out of fuel by Monday after the storm, as news spread about refineries in Houston, shutting down. The gas shortage caused chaos as people dashed to the pumps in panic. I agree, I was one of those people that paid a premium, and watched gas stations increase (regular unleaded) prices from 2.09 to 2.69 (in 4 days).
Katrina (2005), displaced about 400,000 people. After the hurricane, about 90,000 people left New Orleans, 50,000 of those relocated to Houston, and the rest, relocated to Austin, Florida, etc.
Let’s talk about Houston. It is a concrete jungle where water can only go to the sewers, once the sewers are full, they overflow to the roads. Second, the topography is flat, and where there is dirt, it is limestone just like in Austin, where the water stays on top and does not seep into the ground. Based on the ratio between Harvey and Katrina, Harvey affecting 250 times more than Katrina, or estimating about 225,000 people are likely to relocate.
After Katrina, the real estate in the areas affected in New Orleans felt a 22% loss in the values of their homes. It’s too soon to determine how Harvey will affect South Texas’ real estate.
Here are my personal thoughts. This information is just based on my research and my many years in real estate, I am not an economist.
People are most likely to move out of South Texas due to:
1) Those from Houston whom have seen way too many hurricanes (prior Hurricane is Rita, but endured a chaotic evacuation), and possibly Irma;
2) Those who cannot rebuild their properties because they do not have flood insurance, will most likely walk away;
3) Those who receive a settlement from their insurance may walk away instead of rebuilding;
4) Those who are currently in shelters outside of Houston and are not able to find affordable temporary housing due to increased rent and lack of hotel vacancies are pushed out of Houston;
5) Other reasons
The main point is, where would these 225,000 people most likely to relocate to? They are more likely to stay in Texas. Even if 100,000 people moved to Austin, that would be about 25,000 properties to be rented or sold, a surge in a small period. Just in comparison to 2016, 33,000 properties listed on MLS SOLD in Austin, per ABOR. Due to the unfortunate loss, this certainly would be good for Austin’ real estate.
Here are more interesting information I received today:
Hurricane Harvey is expected to cause rents in Houston to increase as much as 10%. Home prices are also expected to jump due to even lower inventory.
Hurricane Harvey has caused jobless claims this week to rise to a 2-year high. The weekly increase of 62,000 was the largest since November 2012.