As you may have seen on the news, a guy named Harvey moved through Houston in slow motion and definitely wore out his welcome. We had rain. Lots of rain. Enough rain that the weather channel had to code it with a new color. I've heard lots of different estimates regarding the number of homes that were damaged or destroyed and it numbers in the thousands. Many of these homes were not located in the flood plain and therefore, flood insurance was not mandatory so not purchased. Several subdivisions were flooded when water was released from the damns and reservoirs in order to prevent further damage to certain areas. In other words, some homes were sacrificed in order to save properties downstream. In many areas, the levees and retention ponds were stretched beyond their maximum limit and the water poured in. In my subdivision, a diver went underwater in the middle of the storm to repair a valve that was allowing flood water into our streets. They are calling this a 1000 year flood. Right now, there are areas of our market that are a hot mess. Sheetrock, flooring, clothes, toys and furniture are stacked in a stinky pile at the curb. Whole neighborhoods are wiped out and unliveable.
The one question I seem to be hearing is "what is this going to do to our real estate market". Honestly, I wish I had an answer. Yes, I can name some great neighborhoods that were untouched by the flooding. I can tell you the ones that were hardest hit. My crystal ball, however, is a bit cloudy (fog maybe?) as to how this is going to impact us going forward. It was a slower than normal summer due to an increase in inventory and competition with the builders in outlying areas. Buyers were scarer than in summers past. Our days on market were higher and we found sellers willing to negotiate more than in recent years. Mother Nature may have cured our inventory problem, but will the buyers return?
I have heard different estimates stating that only 10-15% of the owners whose homes were flooded were covered by flood insurance. That is going to result in a lot of disappointment and financial hardship for a lot of people. One of my clients was just going to walk away from his home as he thought he had no chance of selling it. His equity was high and his mortgage balance low, pre-Harvey. He will lose some equity, but I have convinced him that some investor will want his house once it's gutted and ready to be rebuilt. He is one of the lucky ones. Even at an investor price, he will put a little money in his pocket. What about the uninsured who have little equity and lots of damage? How many of them will just walk away? Are there enough investors to pick up the inventory? Will the value of total neighborhoods tank? Will the number of foreclosures rise? These questions remain unanswered.
In the coming days and months, I'm sure the crystal ball will become clearer. For sure though, this will change the landscape of our real estate market citywide. No one could have predicted this, even though we have always known we live in a swamp. And even though the inner city areas do not have zoning, the suburbs have done a great job of planing, building retention ponds and levees with flooding always in mind. Fifty inches of rain was never planned for and we stand in awe at the magnitude of this storm.
As Irma now bears down on Florida, our Texas prayers are with them. We wish natural disaster on no one. The impact on our market was not from bad lending or mortgage fraud. It was changed dramatically by a much higher power. We will make it. My crystal ball will begin working again and Houston will be back.