Hurricanes can have stormy effect on real estate - Posted by Barry (FL)
Posted by Barry (FL) on September 20, 2004 at 20:01:32:
Down, not out
Hurricanes can have stormy effect on real estate
By Andrea Coombes, CBS.MarketWatch.com
Last Update: 4:06 PM ET Sept. 17, 2004
SAN FRANCISCO (CBS.MW) – Just days after Hurricane Charley devastated Charlotte County, Fla., real estate vultures flew through Punta Gorda and other towns, offering cash for ravaged homes, local real estate experts said.
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It’s exactly what happened in Homestead, Fla., after Hurricane Andrew flattened that town in 1992. But this time around a booming real estate market means fewer owners are willing to sell, despite the devastation wreaked by Hurricanes Charley, Frances and now Ivan.
“There was a flood of bottom-feeders coming into the market two or three days after Charley, all wanting to cash in on the devastation. They remembered in Homestead there were a lot of buys. People took their insurance checks and got out,” said Frank D’Alessandro, a partner with D’Alessandro & Woodyard Realtors, based in Fort Myers, Fla., just south of Charlotte County.
“Here, we’re not seeing the panic we saw in Andrew, and that’s simply because they didn’t have the demand in the market. Charlotte and Lee County have a lot going for them that at the time Homestead didn’t.” D’Alessandro’s company focuses on commercial real estate, but procures land for residential developers and studies statewide real estate trends.
The median home price in Charlotte County’s Punta Gorda metropolitan area rose 30 percent in July, to $176,800 from $135,900 a year earlier, and the number of sales rose 19 percent for the year versus a 15 percent jump statewide, according to the Florida Association of Realtors. Statewide, the median price rose 15 percent in July, to $186,700 from $162,600 a year earlier.
Short-term sales dip, but higher prices?
Still, no matter how high Florida’s local real estate markets were flying before Hurricanes Charley, Frances and Ivan took their toll, there’ll be a short-term hit to sales in affected areas.
“If you have a major regional event, [there is] a temporary impact on traffic and transactions,” said Walt Molony, spokesman with the National Association of Realtors.
But “when you look at state data on a quarterly basis, you don’t see any impact on the quarter, because it smoothes out in that timeframe. It delays or postpones transactions. It doesn’t make them go away.”
Soraya Nasrallah experienced just such a delay when Hurricane Frances rammed through Boca Raton, Fla. The investment broker and author had to delay plans to sell her one-bedroom condominium.
“Everything halted,” she said. Still, a week later a Realtor called, ready to help her sell, and the storm may have brought a certain cache to her home, as it withstood the onslaught without damage.
“In a weird way, this was a little bit of a blessing,” Nasrallah said. “Whoever sees it, I’ll say these two hurricanes have passed by, and nothing’s happened. I think I’ll be able to obtain a little bit more because nothing really happened.”
While a hurricane can delay sales, the crunch on housing supply can push prices higher, at least temporarily. Existing homes need repairs before they can be sold – and repairs are often delayed as contractors compete for a limited supply of workers and materials – and new-home building is on hold as repair work is completed.
“When you have a limited amount of supply but the same amount of demand, that increases prices,” D’Alessandro said, noting that demand appears to be on the rise in the southwest Florida counties of Lee and Charlotte after a lull. “Once builders are able to deliver the volume again, I think that will get back in balance.”
The degree to which demand has suffered is unclear, but Harriet Slater, a Realtor in Boca Raton, says her business is back to usual levels, despite the upheaval caused by Frances just over a week ago.
“I personally am not seeing a slowdown,” Slater said. “I actually showed property the Friday before Frances hit … they were interested in the house and they said they wanted to go back after the hurricane to take another look.” The house sustained minor damage in the storm, and the prospective buyers are now preparing an offer.
While homeowners may see some temporary price appreciation, Florida’s tourism industry may be less pleased: The barrier islands, such as Sanibel and Captiva Islands, were among the hardest hit.
“We don’t know if we’re gong to have all of our inventory on the islands up and ready for the season,” D’Alessandro said. “A lot of that inventory is seasonal rentals, meaning resorts and hotel condos.”
The danger for Florida’s real estate market is that frequent hurricanes cause homeowners to exit, and prospective homebuyers avoid the state altogether.
About 10 percent of those who evacuated Dade County for Hurricane Andrew left permanently – some 40,000 people in all, according to a 1996 report by the University of Florida’s Bureau of Economic and Business Research.
Geographers say our willingness to locate to a region is unaffected by disasters which hit less than once every seven years, said Grant Thrall, professor of business geography at the University of Florida.
“If we are indeed entering into a cycle of hurricanes regularly hitting the Florida coast several times, like we’ve just experienced with Tropical Storm Bonnie, Hurricane Charley, Hurricane Frances and Hurricane Ivan, then that will certainly have an impact on people’s decision to move to Florida,” he said.
Nasrallah, the Boca Raton homeowner, worries that frequent hurricanes could put downward pressure on prices in her local market.
“There is a possibility that people are getting very scared over what’s going on with all these hurricanes,” she said. “From what I hear on the news, for the next few years we will get hit with hurricanes a little bit more than before. A lot of people are leaving Florida. That could affect everything. In a way, I’m not sure whether buying another place in Boca is the right thing.”