In recent years, we have seen some powerful and destructive hurricanes hit various parts of the country. As evidenced by last year’s landfall on southwest Florida from Hurricane Ian, the aftermath can be quite destructive and daunting. Needless to say, the level of destruction leads to many residents being displaced as many homes are uninhabitable. So what are the ultimate impacts on local markets from these devastating storms? Recently, researchers based at Resources for the Future (RFF), the University of California San Diego, and the U.S. Government Accountability Office analyzed conditions of the housing markets and population turnover in Florida from 2000 to 2016 after these storms.
Hurricanes lead to gentrification
Oftentimes, it is believed that a devastating hurricane making landfall in a certain area will lead to lower demand for housing as many residents may end up relocating out of the area. However, this is exactly the opposite of what happens. In fact, what has been observed is that these areas tend to attract wealthier inhabitants. The result is more competition for a limited inventory of homes which ultimately drives up prices. This phenomenon typically lasts for approximately three years while the housing stock is built back up. So what exactly is seen during this three year period while an impacted area is being built back? Here a few findings being seen:
- The average income of new home buyers increases proportionately with rising home prices.
- On average, home prices rise by 5% in the hurricane impacted areas during the three years following a storm. After this period, prices tend to go back to pre-storm levels as a baseline.
- Other than income rising, there typically is no changes in the socio-demographic characteristics of neighborhoods after a hurricane.
- Hurricanes do not impact the long-term demand for housing in areas affected by storms. It is believed that wealthier inhabitants may move to the area following a storm because they can weather the higher home prices and insurances costs.
The findings above are certainly interesting and may even be counterintuitive to many. In fact, we are currently seeing this phenomenon taking place in southwest Florida as this article is being written. As markets such as Naples, Bonita Beach, Estero, Cape Coral, Captiva, Sanibel, and Fort Myers are rebuilding from the devastation caused by Hurricane Ian, we are seeing home prices rise. Another interesting finding is that we are also seeing more buyers from the northeast entering the area. Historically, we tend to see more northeast buyers moving to southeast Florida while more midwest buyers move to the southwest coast of the state. Nonetheless, the economic impact and effect on housing from hurricanes is quite substantial.
Do you have questions about the South Florida real estate market? We can help. Whether you are buying, selling, or renting, feel free to contact our team of experts at Live South Florida Realty, Inc. today! Would you like to have the power of the South Florida MLS right on your smartphone or tablet? Then download the free Florida Home Search app today!