In the aftermath of the damage caused by Hurricane Harvey hitting the Gulf Coast in late August, Dean said it is too early to confirm specific projections about the Greater Houston area’s economy but offered insight for the economic outlook in the coming months.
What sectors of Houston’s economy were hit the hardest?
What we’ve been able to glean so far is that no one sector was the hardest-hit, but one classification in business size [was]—small-business entities. Even if a sizable portion of [large businesses’] employees had to take time off for an extended period of time after the flood, they still had people and resources to keep moving forward.
If you’re a small business, you may not have any employees besides yourself and your family. If you’re forced to shut down because of lack of staff—or even worse, because of damage to your facility—you can’t generate revenue. The smallest businesses are the ones that may not have flood insurance, so not only do they have their revenue halted for a period of time, but then on top of that, they have to put out a big capital expenditure to fix their facility if they didn’t have flood insurance.
How will Harvey affect residential real estate?
We have been in a prolonged condition of oversupply of rentals of apartment units. For the last two to three years, [developers] ended up building many more apartment complexes than there was demand for. Literally overnight, that has flipped. Depending on which number you look at, 80,000-100,000 homes in the region were damaged, so now those folks need a place to live. Occupancy rates across the board of apartment complexes improved almost immediately.
For the resale single-family market, we’re beginning to see slight price increases for homes that were in the areas that did not flood. We’re not yet seeing it as dramatically as one might expect. I think to some degree it’s probably a little bit of common decency going on that people are not going to immediately try to capitalize on the situation, but we are seeing a little bit of that.
What are the best- and worst-case scenarios for Houston’s economic future?
Long-term, the best-case scenario is that the Houston region rebuilds to some degree in a sustainable way that mitigates further loss and risk from any future flooding events. Also really focusing on drainage solutions that are bigger scale than what has been on the table in recent years. If that continues to happen, population is likely to continue to grow at a similar rate [to] the last 20 years: 20-25 percent.
The worst-case scenario is that [the economy] kind of stalls out—that there is some level of risk perceived to opening a business in Houston.
Houston received enough good publicity and good press coming out of this tragic event that the nationwide narrative about Houston is still pretty positive.