Natural disasters can rattle local housing markets
Based on declining overall foreclosure activity, it’s clear that the nation’s housing market is free of systemic,
widespread distress. The market now aligns to the axiom that all real estate is local — a good sign, except in
local markets where distress is on the rise because of a shock to the local or regional economy.
In 2017 those local market shocks often
came in the form of natural disasters,
such as floods, hurricanes, wildfires,
earthquakes and volcanoes. The year’s
steady drumbeat of natural disasters
led to an estimated $306 billion in
economic losses, making it the third-most expensive year for the insurance
industry, according to Sigma.
Let’s take a look at two such natural-disaster events in 2017 and the domino
effect they had on their respective local
housing markets — Hurricane Harvey
in Houston in August of last year and a
series of wildfires that struck Santa Rosa,
California, this past October.
Sales of single-family homes and condos
in the greater Houston metro area plummeted 15 percent in the third quarter of
2017, compared to the previous year —
the biggest year-over-year drop since
second-quarter 2011. Home sales, however, picked back up again in the fourth quarter of 2017, up 5 percent on a
year-over-year basis, and they were basically unchanged on a year-over-year basis in the first quarter of 2018.
The Santa Rosa market also experienced a home-sales rollercoaster following its natural disaster event, although
not as dramatic on the downside. Home sales in Sonoma County, which comprises the Santa Rosa metro area,
decreased 1 percent in the fourth quarter of 2017, and bounced back quickly in the first quarter of 2018, spiking
18 percent from a year earlier.
The good news here is that while home sales not surprisingly take a short-term hit after a natural disaster,
sales pick back up quickly — at least in markets with strong underlying economic fundamentals.
The median home price in Sonoma County in fourth-quarter 2017 — the quarter during which the wildfires
destroyed more than 6,000 homes — was $620,000, up an astounding 16 percent from a year earlier and the
fifth consecutive quarter in which home prices were up 9 percent or more on a year-over-year basis. In the first
quarter of this year, however, median home prices in the county dropped 6 percent, to $580,000 — still up
6 percent from a year earlier, but the biggest quarter-over-quarter drop since fourth-quarter 2010.
In Houston, annual home-price appreciation steadily declined in the quarters following the hurricane, dropping to 3 percent in first-quarter 2018. That was the lowest annual home-price appreciation for Houston since
The negative impact of natural disasters on a local housing market becomes most evident in the foreclosure
activity numbers. Immediately following Hurricane Harvey and the Santa Rosa wildfires, there was a sharp drop in
foreclosure starts in the areas affected by the respective disasters — a byproduct of the foreclosure moratoriums
enacted by many lenders following such natural disasters.
There is now a foreclosure storm emerging in both Houston and Santa Rosa, however.
Houston foreclosure starts have increased on a year-over-year basis for three consecutive months ending in
June 2018, reaching a 33-month high this past May. Santa Rosa foreclosure starts jumped from zero in May 2018
to 131 in June 2018 — a 44-month high.
This increase in foreclosure starts will likely continue for most of 2018 as lenders play catch up from foreclosures
delayed by the moratoriums and given the fact that there is a greater risk of default for homes that were destroyed
or damaged by the two natural disasters — particularly those without adequate insurance. As these distressed
homes hit the market for sale, we may see even more drag on home-price appreciation in both markets. n
Daren Blomquist is senior vice president at Attom Data Solutions. With
Attom Data Solutions since 2001, he is
the company’s primary media spokes-person and an expert on the housing
market. Blomquist is executive editor
of the company’s award-winning
Housing News Report and creates
comprehensive real estate reports
cited by thousands of media outlets
and referenced by numerous entities,
from local real estate investment
clubs to multinational corporations,
universities and federal, state and local
government agencies. Reach him at
Foreclosure starts Year-over-year percentage change
Hurricane Harvey’s Effect on Foreclosure Starts in Houston