Hurricanes hit Texas, Florida, and Puerto Rico in 2017, inflicting a total of $265 billion in damages in less than a month. That was an especially brutal hurricane season. But natural disasters cause millions of dollars of damage in the United States every year, and the widespread damage they cause has a curious effect on the real estate market—one that investors might not expect.
The Multifamily Real Estate Market After a Hurricane
The surge in the Houston multifamily real estate market after Hurricane Harvey was widely noted. The city’s reserve of vacant apartments provided valuable relief to people whose homes were damaged in the storm and housing for those who took up temporary residence in the city to help with recovery efforts. The boost the market received at that time smoothly transitioned into a permanent gain as the city’s economy returned to normal. In Houston’s case, the market rose in tandem with the recovery of the oil industry.
The recovery of the Houston real estate market is not unique. Hurricane Irma battered the Atlantic region just days after Harvey reached Houston. As a real estate executive in Miami noted just prior to Irma, “the best real estate years” follow a hurricane. “Insurance money floods into the marketplace and allows people choices.” Although some of the market activity is investor flight from a difficult market, that too opens up possibilities for other investors.
Natural disasters can eventually drive down the price of property that is repeatedly impacted, but it can have the opposite effect on nearby properties that withstand the test of the elements. Municipal responses to natural disasters can have a decisive effect on property values, as was clearly seen in Miami, which revised its building codes in response to Hurricane Andrew in 1992. “The newer buildings were literally unscathed,” a representative of a local development company said. “No broken windows, no flooding.” Nor were there power outages in the areas where lines had been moved underground. In Texas, the City of Houston and Harris County are implementing stronger flood-control measures in new zoning codes, as well.
Investment Opportunities after a Hurricane
The burst of activity in the real estate market after a hurricane provides opportunities for new investors to enter the market—possibly with a discount—as disillusioned property owners depart. A post-hurricane discount is far from a sure thing, however, as experience with multifamily housing in Houston showed. The acquisitions market in Houston is warming up, but the low activity in the first few months after Hurricane Harvey was seen as evidence of property owners holding out for higher prices as the economy recovered.
The importance of insurance and professional management may be the biggest lesson for investors to learn from the recent hurricanes. In Houston, CWS’s large team, high level of organization, and extensive insurance coverage made it possible for us to assist our displaced residents after Hurricane Harvey struck and to expedite repairs.
Now, economic and demographic forces are shaping the multifamily housing market in Houston and other recently stricken cities, and life is returning to normal in those places. Physical reminders of the disasters will become increasingly less noticeable. As development continues, builders have the chance to incorporate disaster protections into their architecture. Raised entranceways, shatterproof windows, and other safety features will benefit residents by protecting them and their property, and benefit owners by protecting their investments.
Investors should be aware of the potential impact of hurricanes and other natural disasters on their properties and be prepared for emergency situations that might arise as a result. The effect of a natural disaster on the value of a property is generally short-lived, unless the property is in an exceptionally vulnerable location. A professional investment adviser can evaluate the risks of an individual property and the effects they might have on its value.
At CWS Capital Partners, we can help you invest in the Houston market and other major markets around the country. We have 22 multifamily investment properties in Houston and its suburbs. Our experts have a thorough understanding of the city and its multifamily real estate market, and we can help you acquire or develop a property, reposition a property, or take part in a 1031 exchange.
Please contact us to learn more about investing with CWS Capital Partners, or view our current offerings by completing our self-certification form for accredited or qualified investors.
The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.
All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.
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Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.