Hurricane Michael / NOAA

How Major Hurricanes, Such as Harvey, Impact Real Estate Markets

According to several recent studies the impact of hurricanes on real estate markets, especially those of Category 3 and above, last longer than previously believed. This is based on data from the National Hurricane Center, the National Council of Real Estate Investment Fiduciaries (NCREIF), as well as academic research from Dr. Li Beracha, Ph.D. and Dr. Robert S. Prati, Ph.D.

These results raise several issues, not only for property owners but also for investors such as the hedge funds and private equity funds who place a significant portion of their money in the sector. Among the issues uncovered include the impact of major natural disasters, such as Hurricane Harvey which inundated the Houston, Texas area in 2017, were those surrounding implications for property valuations, rental yields, and the rising insurance premiums.

Beyond this are also the challenges property owners face in paying for repairs following a major event. For example, Guardian Roofing noted that many owners seeking to replace their commercial roofing in Houston found that “the roofing structure may not be properly installed leading to potential gaps.”  This not only led to substantial damage during the storm but also increased costs during the cleanup.

As a result, property owners either had to wait for insurance of government aid to cover the cost of repairs, tear down their structure and start over again, or decide to abandon the property altogether. These can be difficult decisions to make in the short-term but what researchers wanted to do was track the impact over the long-term.

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