In the aftermath of Hurricane Florence, what is the outlook for Wilmington real estate? You might be surprised.
The heart-wrenching impact of Hurricane Florence on our community and on those who have lost so much will be felt for a long time. But I've been awed watching neighbor helping neighbor, the dedication of first-responders, the generosity of volunteers, and so many actions that show the best of the human spirit. Our community is resilient.
I believe there are good reasons the real estate market in Southeastern North Carolina will likewise show great resilience and come back stronger than ever. Although we've been hard-hit, local real estate industry leaders are optimistic a turn-around will be quick. Here are some of the reasons why they think this.
History tells us the slowdown will be short-lived
Hurricane Harvey in Houston and Hurricane Irma in Florida in 2017 demonstrated that while real estate markets are initially hard hit by a significant hurricane, the slowdown is typically short-lived.
-- For the 5 days before Harvey and the 5 days after, homes sales (NOT PRICES) dropped by almost 96 percent.
-- The week after the storm, agents were touring homes and writing offers and calls from investors quadrupled. (We are already seeing that here.)
-- The number of homes sold returned to pre-storm levels within 3 weeks, with homes prices holding steady.
Impact on property values
-- With inventory already tight, undamaged properties will be in high demand and may shoot up in value.
-- A June 25 2018 Forbes article reports that hurricane damage actually causes housing prices to go up. A 2010 Federal Reserve Bank study reported that the "typical hurricane strike raises house prices for a number of years, with a maximum effect of between 3 to 4% three years after occurrences."
-- In Texas, two months after Hurricane Harvey, the Houston BizJournal reported that 31 neighborhoods saw an increase in median home prices.
-- Rents will likely rise as displaced homeowners seek housing while their homes are being repaired. (Unfortunately, in the short term there is a severe shortage of rental options for displaced homeowners, as described in a recent Wall Street Journal article.)
Opportunities in the crisis
As terrible as Hurricane Florence has been to our community, it will also create opportunities for the local real estate market.
-- Buyers with badly damaged homes are eager to get into a new home and may pay a premium to do so.
-- Unflooded homes will be in high demand and may sell at prices higher than pre-Florence.
-- Investors see damaged homes as opportunities to repair or rebuild and then resell at a profit.
-- Some damaged homes may be rebuilt higher and larger and may net a higher price than pre-Florence.
Several long-term trends will continue to boost housing demand for Southeastern NC.
-- growing economy
-- strong labor market and low unemployment
-- millennials coming of age to enter the housing market
-- baby boomers living longer and more independently than previous generations
Demand will grow for hurricane resistant construction
Florence may discourage some from moving into hurricane-prone areas, but this is typically more than offset by a larger focus on new construction and more homes equipped to handle hurricane-force winds and flooding (by building up).
More buyers will be looking for hurricane-resistant features in a post-hurricane market, which means these features will add more value to the home.
The bottom line
There's good news ahead for sellers, investors, and buyers looking for more hurricane resistant homes that will build equity. Finding rentals and affordable housing as prices rise will continue to be a struggle.