“The impact of hurricanes has had historically little impact on pricing,” said James Gaines, chief economist for the Real Estate Center of Texas A&M University. “The impact was quick and [prices] bounced back very quickly.”
The region’s healthy housing market has sustained it through recent flooding events in part because factors, such as job and population growth, are the primary long-term drivers of real estate prices, said Keller Williams Broker Paige Martin, who works with home buyers and sellers in the Greater Houston area.
“Even including the effects of Hurricane Harvey … the Houston real estate market had its second-best year ever [in sales] in 2017,” Martin said.
Immediate effects
After floodwaters receded following Harvey, many Greater Houston area homeowners were faced with the decision of whether to sell or renovate, Martin said.
That could mean taking a loss by selling a property for the value of the land, investing money to raise the house above the previous flood level, or adding fortifications and other improvements, she said.
“Areas that were hit hard by flooding saw its median home price dip by as much as 35 percent immediately after Harvey,” Martin said. “The neighborhoods in the Greater Spring area did much better on average than flooded neighborhoods like Meyerland.”
In its September 2017 report, Houston Association of Realtors reported a 25.4 percent decline in single-family home sales in August compared to August the previous year, although the year-to-date sales remained 1.8 percent above the same month the previous year.
However, individual houses sold without renovations often sold for greatly reduced prices, said Ed Wolff, chairman of the HAR government affairs advisory group. Wolff said post-Harvey recovery is following a pattern similar to that seen in previous hurricanes, but the rapid succession of three flooding events in three years—including the Memorial Day Flood in 2015 and Tax Day Flood in 2016—in some areas complicates the recovery process.
“We are in the cycle that has been consistent over the past events, that we are seeing the initial drop in value that occurred within three to four months after Harvey,” Wolff said. “We are seeing a gradual increase in average values because we’re seeing homes that have been remodeled.”
Neighborhood recovery
In the Wimbledon Champions neighborhood near Cypresswood Drive, every one of its houses flooded, said Elaine Holman, president of the community’s homeowners association. For some houses—about 10 percent of them—it was not the first time they had flooded, she said. The neighborhood includes 345 houses, Bailey said.
In the months after Harvey, about a third of the flooded Wimbledon Champions houses were sold without improvements to investors or to buyers who were willing to tackle renovation, she said.
“A lot of those have flooded before, [and residents] are exhausted and don’t ever want to do that again,” Holman said. “A few people take the opportunity to renovate, but that’s an awfully optimistic approach.”
Keith Weaver, a board member for the Ponderosa Forest Homeowners Association, said he has seen three situations in which owners have not been able to immediately rebuild or sell the properties.
“We’ve got folks that were just utterly devastated by it, and they are in a situation that their insurance is either not paying or [slow paying], and that causes a rebuild issue,” Weaver said. “And then we’ve got folks that lost everything that they had, and the county’s not going to let them rebuild. And then you have the folks that don’t have the money to put into it.”
Pamela Bailey, CEO and owner of Chaparral Management, which manages 70 community associations in Northwest Houston, said 12 of those communities flooded during Hurricane Harvey, some for the first time in their history.
For example, in the Wimbledon Estates community, located off Cypresswood Drive, 112 of the neighborhood’s 792 houses flooded, she said.
However, Bailey said in her conversations with homeowners, she learned many Wimbledon Estates homeowners are renovating and planning to stay in their houses.
In the 77379 ZIP code, which includes Wimbledon Champions and Wimbledon Estates, the median sales price actually increased by 4.6 percent from May 2017-May 2018, according to data provided by Jill Henderson, owner of Red Door Realty and Associates.
“I think the owners are saying, ‘I had flood insurance, I needed to clean this house out, the science projects have gone down the river and we’re going to make this house work for us,’” Bailey said. “I hate to think this is a positive thing, [but they] took lemons and made lemonade out of them.”
Long-term prospects
Significant long-term declines in neighborhood house values are not typical after flooding except in areas where houses are bought by the county for flood prevention, several real estate experts said.
“The most interesting trend … is seeing some neighborhoods record fewer sales but [their] home prices continue to increase,” Martin said.
Across Harris County, this trend can be seen in a steady increase in the average price per square foot since 2012, according to data collected by the Texas A&M University Real Estate Center. The average price per square foot hit $90 in early 2015, and climbed above $100 in 2018 despite floods happening in the county during that time period, according to the study.
However, there are challenges for new construction in flood-prone areas. For example, the county approved new requirements in December for developers to build at 2 feet above the 100-flood plain level in areas located within the 500-year flood plain, or areas expected to flood once every 500 years.
The long-term effects on the cost of construction and ability to sell houses located in a flood plain has yet to be determined, Gaines said.
“Hurricane Harvey only highlighted the importance of location, land value and overall quality of the property,” Martin said.
