What Ian Has Done to Florida’s Homes and Apartments Markets

Debate as you wish when it comes to climate change and its generation of more and greater national disasters. Floridians have more important things on their minds today.

Meanwhile, Realtor.com released a report earlier this month about home-shopping consumers’ behaviors when it comes to moving to high-risk areas.

High-risk areas would include those that are prone to flooding and wildfires.

Coincidentally, the report came during the time of Hurricane Ian, considered among the costliest storms on record in the state of Florida.

Danielle Hale, chief economist, Realtor.com, tells GlobeSt.com, “Across the U.S. as data on flood risk becomes easier to access and major flooding events make national news, home shoppers are more aware of the risks they face, and in some cases, we’re seeing evidence of a shift away from the riskiest properties.

“Nationwide, this means a very small difference in the rate of price growth, with homes at greater risk of flooding lagging behind those at lower risk.”

Hale said that the gap in home price growth is generally greater in areas with greater risk of storm surge, but trends vary depending on the local market and there can be exceptions to these general trends.

For example, while in Walton County, Fla., Realtor.com sees much slower home price growth in the highest risk homes during the past six years, in Pasco County, Fla., it sees the opposite.

“Price growth among homes at higher risk actually outpaced price growth among lower-risk homes,” Hale said.

“Statewide, our analytics data suggests that shoppers who interacted with flood risk on maps in Florida tended to view properties with slightly lower risk scores on average after seeing the data, reinforcing the idea that this information tends to nudge shoppers very modestly in the direction of lower risk homes.”

When Homebuyers Look at a Flood Map

Realtor.com found that viewing wildfire risk on maps has no impact on the risk level of homes that users view in California, Oregon, or Utah.

In Arizona, Florida and Mississippi, users do look at the details for properties with higher risk after viewing maps.

After viewing flood risk on maps, users searching in Florida, Louisiana and South Carolina, view details for homes with 5% to 7% lower risk scores.

Users in Mississippi shift to homes with a higher risk of flooding, indicating the users are willing to take some risk to find a property that meets their needs.

Vacant Apartment Units Will ‘Fill Up Fast’

Jay Parsons, chief economist and head of industry principals at RealPage, said it’s too soon to measure the full impact of Hurricane Ian on apartment metrics, but past hurricanes can reveal the potential impact.

One of the more recent examples is Hurricane Harvey, which flooded much of the Houston metro area and displaced thousands of residents in August 2017.

“We could see similar impacts in Southwest Florida as we saw back then in Houston,” Parsons said.

“History shows us that after a major storm, vacant rental units fill up fast. Displaced households need a place to live. After Harvey hit, Houston saw a huge surge in apartment demand.”

In fact, Parsons said, the more than 11,000 units absorbed in Q4 2017 ranked as the metro’s second largest ever (at the time). The top quarter ever in Houston for apartment demand was in 2005, when Hurricane Katrina evacuees migrated from New Orleans.

“While the total number of households displaced by Hurricane Ian are not yet known, you can expect demand for vacant units from displaced homeowners and renters alike,” he said. “That’ll likely reverse 2022 trends of declining occupancy rates across Florida – at least temporarily.

Less Than 20% of Floridians Have Adequate Flood Insurance

According to a new Marcus & Millichap report, sparse insurance coverage may direct residential demand to apartments.

“Many homes across the state have incurred water damage, and it is estimated that less than 20 percent of homeowners in Florida have adequate flood insurance,” it said.

“Several homeowners may have to cover the costs out of pocket, which could extend the recovery process and lead to heightened mortgage delinquencies. This will likely place a strain on the surrounding economy and create a lot of uncertainty in the local single-family housing market as some homeowners try to walk away from their damaged dwellings.

Marcus & Millichap said that the combination of newly displaced residents and a significant number of damaged properties on the single-family market could potentially lift demand for apartments in the area for the foreseeable future.

“However, with less than 5,000 physically vacant units in the Fort Myers-Naples metro, apartments in nearby markets in Central and South Florida could potentially benefit from elevated renter demand in the coming quarters as local inventory will likely fall short of the housing needs.”

Who’s Afraid of Florida

The Wall Street Journal columnist Holman Jenkins last week shared his perspectives about how, regardless of cause and severity of natural disasters, the fact remains that Florida is one of America’s fastest-growing states, with 4 million people moving in since 2005.

He said that because of technology and other general advancements, US states in “hurricane alley,” such as Florida, are better prepared, and can “get outta town” ahead of time through weather forecasting and death tolls from storms now are far fewer than before.

He added that he found a greater threat to US citizens are the climate change-fearing local government policies (such as the big freeze last winter in Texas), which lead to more deaths than natural weather disasters.