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OCTOBER 2018 VOL 12 ISSUE 10
MY TAKE BLURRED STATE LINES BENEFIT SFR INVESTORS • P9
BIG DATA SANDBOX 10 BEST DAYS TO BUY A HOME • P13
DATA IN ACTION WHERE TO BUY HOMES WITH LEAST NATURAL HAZARD RISK • P14
Contents
FEATURED ARTICLE
P1 REAL ESTATE INSURANCE: FENDING OFF DISASTER IN A CHANGING WORLD
The real estate marketplace — and with it a big chunk of the nation’s economy — is dependent on insurance in one form or another. It’s the inter-related web of insurance and insurance-like financial structures that keeps buyers coming back for more houses and investors demanding more mortgages. Yet the reality is that risk factors are in transition and new liabilities increasingly impact the marketplace. More and more consumers face higher insurance standards, steeper costs, fewer options and sometimes no options at all.
P9 BLURRED STATE LINES BENEFIT SFR INVESTORS
The lines are becoming increasingly blurred when it comes to local versus out-of-state real estate investing, argues Kevin Ortner, CEO at Renters Warehouse, who explains that advances in technology allow investors to find — and easily assess — the performance of out-of-town rental properties, as well as the range of management options that landlords and investors have at their disposal.
P1
P13 BIG DATA SANDBOX: 10 BEST DAYS TO BUY A HOME
Buyers willing to close on a home purchase the day after Christmas realize the biggest discounts below full market of any day in the year, according to an ATTOM Data Solutions analysis of more than 18 million single family home and condo sales over the past five years. In the hot sellers’ market of the past five years, only 10 days of the year offer discounts below estimated market value — seven in December, and one each in October, November and February. Real estate investors who want to avoid property damage caused by natural hazards should be looking in the Rust Belt, according to the ATTOM Data Solutions 2018 U.S. Natural Hazard Housing Risk Index, which indexed natural hazard risk in more than 3,000 counties and more than 22,000 U.S cities based on the risk of six natural disasters: earthquakes, floods, hail, hurricane storm surge, tornadoes, and wildfires. Our interactive heat map shows you risk factors in any local market nationwide. P14 DATA IN ACTION: WHERE TO BUY HOMES WITH LEAST NATURAL HAZARD RISK
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SECTION TITLE
LEAD ARTICLE
Real Estate Insurance: Fending Off Disaster In A Changing World
BY PETER G. MILLER, STAFF WRITER
Many real estate consumers don’t think about insurance very much. Most assume coverage is always available, just a phone call away. Few worry that insurance won’t be there. But what if such assumptions are wrong? The real estate marketplace — and with it a big chunk of the nation’s economy — is dependent on insurance in one form or another. It’s the inter-related web of insurance and insurance-like financial structures that
keeps buyers coming back for more houses and investors demanding more mortgages. Yet the reality is that risk factors are in transition and new liabilities increasingly impact the marketplace. More and more consumers face higher insurance standards, steeper costs, fewer options and sometimes no options at all. Risks that were rare yesterday are increasingly common. Marginal properties are being washed
out of the system and with them home sales and mortgage originations.
The most visible changes — but not the only changes or arguably even the biggest changes — relate to claims from such things as floods, fires, and droughts. “Most insurance and reinsurance companies are getting smart on climate change and extreme weather
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BILLION-DOLLAR WEATHER & CLIMATE DISASTER COSTS BY YEAR
FREEZE
TROPICAL CYCLONE DROUGHT
FLOODING
SEVERE STORM
WILDFIRE
WINTER STORM
350
300
250
200
150
100
50
0
SOURCE: NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION
events and what it will mean for their viability in the coming years and decades,” said Mark Gibbas, President and CEO with Weather Source. “It is a bit hard to speculate on how these companies will evolve, but I think it is safe to say that they will avoid putting themselves at increased risk without significantly increasing premiums to take on this risk.” Gibbas told the Housing News Report that efforts are now underway to plan for insurance coverage in the future. “The Task Force for Climate Disclosure (TCFD),” he said, “is an organization that is advocating for banks, financial institutions, reinsurance/insurance, and similar companies to engage on climate change so as to not be blindsided from it.” Already, says the Task Force, it has more than 500 supporting organizations worldwide, including
“Insurance carriers will certainly cancel policies in instances where there are repeat fires, and often do not provide coverage in high-risk areas.”
ROBYN MARKOW AVP OF CLIENT RELATIONS QUALITY CLAIMS MANAGEMENT CORPORATION
U.S. backers such as Accenture, Bank of America, Blackrock, CalPERS, and CitiGroup. “Insurance carriers will certainly cancel policies in instances where there are repeat fires, and often do not provide coverage in high-risk areas,” said Robyn Markow, AVP of Client Relations with the Quality Claims Management Corporation, a licensed public adjuster that provides hazard insurance-related services to the mortgage industry and consumers.
to Insurance Requirements) plans which are state-mandated programs that provide insurance to dwellings considered high risk. However, these plans are considered a ‘last resort’, and often coverage is not comprehensive — for instance, it may specifically exclude damage by volcano if it is in a potential lava path. Consequently, properties that are most at risk are left with the least amount of coverage.” “While an insurance company could drop a customer due to too many claims on an individual basis,” Keith Balsiger, president of Nevada-based
“Fortunately for these areas,” she continued, “there are FAIR (Fair Access
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ANNUAL CHANGE IN HOUSTON METRO FORECLOSURE FILINGS
“Home insurers are constantly assessing how much risk they want to assume in disaster-prone areas. Issuing a non-renewal notice to a home insurance policyholder, however, is something an insurer does with great reluctance. The reason — the policyholder often has other policies with the insurer (e.g., auto, life) and may take all of their insurance business elsewhere.”
200%
150%
100%
50%
0%
-50%
MICHAEL BARRY HEAD OF MEDIA AND PUBLIC AFFAIRS INSURANCE INFORMATION INSITUTE
-100%
Balsiger Insurance, told Insurance. com, “they could also elect to not insure any properties in an area prone to claims via natural disasters, such as coastal regions. This could include areas prone to tornadoes, flooding and hurricanes.” “As California wildfires grow larger and more intense,” reported the Los Angeles Times in August, “an increasing number of insurance companies are not renewing policies for customers who live in areas they deem too risky to cover. The state estimates that more than 1 million California homes are considered at high risk for wildfires.” According to the paper “a California Department of Insurance report found that the number of homeowners in the wildland-urban interface who complained about getting dropped by their plans more than tripled from 2010 to 2016. Complaints about increased premiums rose 217 percent.”
Not so fast, say the insurance companies. Dropping policies is not something to be done lightly. “Home insurers are constantly assessing how much risk they want to assume in disaster-prone areas,” said Michael Barry, Head of Media and Public Affairs for the Insurance Information Institute (the III) Barry told Housing News Report that “issuing a non-renewal notice to a home insurance policyholder, however, is something an insurer does with great reluctance. The reason — the policyholder often has other policies with the insurer (e.g., auto, life) and may take all of their insurance business elsewhere. Moreover, many states have either laws or regulations which limit the number of non-renewals a home insurer can issue in any given year.”
says “under all is the land” but increasingly that’s not quite true. In a growing number of markets what’s under homes is water, lots of it. Floods are a massive and burgeoning cost, an obvious problem for homeowners and local communities and a terrible tragedy for those who are lost. Rising waters are causing the entire concept of flood insurance to be re-thought. In 2017 Hurricane Harvey hit Texas and Louisiana, especially the Houston area. Risk Management Solutions (RMS) estimates that insured losses might amount to as much as $40 billion. That’s a big number, but what’s really big is the overall impact. According to the National Oceanic and Atmospheric Administration (NOAA), the storm produced $127.5 billion in total losses.
Flood Risk Hitting Home The National Association of Realtors
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What does the public do when confronted with more than $80 billion in uninsured storm losses? Figures from ATTOM Data Solutions show that as of July 2018 foreclosure starts were up 7 percent in Texas. That’s not a big number but don’t let the state figure fool you. In Houston foreclosure starts increased by 76 percent — the third consecutive month with a double-digit year-over-year increase. And yet Houston homes continue to sell. Not just after Hurricane Harvey but also after the Memorial Day floods in 2016 and 2017. According to the National Association of Realtors, Houston home prices in the second quarter were up 3.7 percent from a year earlier. One reason home values are rising in high-risk areas is simply that local populations are increasing. According to The Wall Street Journal, between 1980 and 2017 “Gulf and East Coast shoreline counties, those vulnerable to hurricane strikes, increased by 160 people per square mile, compared with 26 people per square mile in the rest of the mainland, over the same period.” Houston home prices are rising despite three “500-year” floods in three years. It seems counterintuitive, but the Houston phenomenon is commonplace. Across America homes in disaster-prone areas are in demand. Research from ATTOM’s 2018 U.S. Natural Hazard Housing Risk Index found that median home prices in high-risk cities typically appreciated 40 percent during the last 10 years. That’s 1.7 times the appreciation in the overall U.S. housing market during the same time period.
Flood Insurance Realities The reality is that while shoreline and coastal coverage is available today, the current system faces massive challenges. The National Flood Insurance Program (NFIP) is broke. According to the Congressional Research Service, as of April the NFIP had the authority to borrow $30.425 billion from the Treasury. It currently owes the Treasury $20.525 billion. This suggests that another $9.9 billion can be borrowed.
Still, there are signs that demand for home may be weakening in areas with high risk for specific types of natural hazards — namely flood, hurricane and wildfire, all three which were the cause of substantial damage to homes in 2017. The ATTOM report shows that median home prices in the highest risk category for flooding are up 12 percent compared to 10 years ago, half the overall market appreciation of 24 percent. Ten-year home price appreciation in areas at the highest risk for hurricane storm surge and wildfire also tracked below the overall market.
10-YEAR HOME PRICE APPRECIATION BY NATURAL HAZARD RISK
HIGHEST-RISK FOR HURRICANE STORM SURGE
8%
HIGHEST-RISK FOR FLOOD
12%
21%
HIGHEST-RISK FOR WILDFIRE
24%
OVERALL HOUSING MARKET
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However, this ability to borrow more is only possible because in October 2017 Congress cancelled $16 billion in NFIP debt. To make matters more complex, the NFIP cannot raise premiums to the point where the program is self- sustaining. In 2012 Congress passed the Biggert-Waters Flood Insurance Reform Act and one result was higher costs for coverage. In the case of one Florida homeowner, the premium for a $300,000 property went from $1,900 annually to more than $49,000. In 2014, bowing to political
Affordability Act, which limited annual premium increases to a still-hefty 18 percent. The program today includes roughly 5.1 million homes in some 22,000 communities. Residential coverage is limited to $250,000 for structural damage plus $100,000 for contents. The number of communities and the volume of properties is so great that the government cannot allow the NFIP to lapse. To do so would end coverage valued at $1.2 trillion. Lenders could turn to force-placed insurance if the NFIP is shuttered, but what private-sector companies
have the ability to offer the necessary coverage? How would borrowers pay market-rate premiums? Lenders might foreclose but a sudden and massive number of properties for sale would crush shoreline values. Meanwhile, mortgage investors would want their payments, thus setting off massive problems with Fannie Mae, Freddie Mac and the secondary market. “If a prospective homeowner has secured a mortgage, the lender is going to insist on the home having property insurance coverage so as to protect the lender’s financial stake,” says Michael Barry of the Insurance Information Institute. “I have not heard of instances in which a home was foreclosed upon because of an inability to get insurance coverage.” The NFIP is now scheduled to expire on Nov. 30. What happens then? No one really knows but some strategies are clear.
pressure, Congress passed the Homeowners Flood Insurance
“Flood insurance had long been considered an untouchable risk by private insurers because they did not have a reliable way of measuring flood risk. In recent years insurers have become increasingly comfortable with using sophisticated models to underwrite insurance risk, and modeling firms are getting better at predicting flood risk.”
INSURANCE INFORMATION INSTITUTE
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2018 NATURAL HAZARDS HOUSING RISK HEAT MAP VERY LOW VERY HIGH MODERATE HIGH LOW
CLICK HERE TO VIEW INTERACTIVE VISUAL
Coverage Adjustments First, coverage has to continue. The local economic damage from an end to the NFIP would be politically untenable. Second, one way to cut flood insurance losses is to have fewer policyholders. A poll by the Insurance Information Institute found that in 2016 “12 percent of American homeowners had a flood insurance policy, lower than the 14 percent who had the coverage in 2015.” Unfortunately, reducing insurance losses does not mean that future losses in general will go away or be smaller. Fewer insurance policies simply redistributes risk.
“Producing accurate flood maps should not be done by a single party and certainly not solely done by the U.S. government. I believe we would be better served by having a number of qualified groups involved in producing flood maps. The schedule for producing flood maps should be at least yearly.”
MARK GIBBAS PRESIDENT AND CEO, WEATHER SOURCE
Information Institute. “In recent years insurers have become increasingly comfortable with using sophisticated models to underwrite insurance risk, and modeling firms are getting better at predicting flood risk. “In 2017,” said the Institute, “direct premiums written for private flood insurance totaled $589 million, up 57 percent from $376 million in 2016. The number of private companies writing flood insurance increased to 33 in 2017 from 20 in 2016.”
crucial to required insurance coverage — have to get better.
Flood maps are notoriously out-of- date or simply inaccurate. As NPR reported in 2016 regarding New Orleans: “Overnight, more than half the population moved out of the so-called high-risk zone.” “The new maps are like a bureaucratic magic trick. At the stroke of midnight, the federal government waved its wand, and Friday morning more than
Third, expect private coverage to grow.
“Flood insurance had long been considered an untouchable risk by private insurers because they did not have a reliable way of measuring flood risk,” explained the Insurance
Fixing Flood Maps Fourth, flood maps — which are
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by organizations who do not have a stake in the outcome.”
“Flood insurance traps homeowners in a situation no one wants to be in: forced to rebuild in a location that will inevitably flood again. It’s time to start helping people move to higher ground, rather than make them wait for the next flood.”
“For cities to grow,” she explained, “they need flood maps to be favorable to their areas because potential home buyers are shy of purchasing properties in a flood zone. Properties in a flood zone must often be insured by the National Flood Insurance Program (NFIP) because private insurance may be unavailable or cost-prohibitive. If individuals are not required to buy flood insurance, they won’t, leaving them without assistance in the event of a disaster and decreasing the financial impact to the NFIP in the event of a disaster. The NFIP has been subject to budget cuts over the years so by reducing flood zones, it reduces the liability of the NFIP.” Managed Retreat Fifth, living in flood-prone areas will need to be re-thought.
ROB MOORE SENIOR POLICY ANALYST, NATURAL RESOURCES DEFENSE COUNCIL
half of New Orleans woke up in a land safe from storms and flooding.”
“As a matter of fact,” Gibbas noted, “after Hurricane Harvey (which Weather Source researched extensively) the government is left with a challenging problem, which is whether to designate certain parts of Houston to be in a flood zone as a result of one storm. Opponents say no, as this is (a) 500-year storm, but many experts believe events like Harvey have become the norm and
“The flood maps are often wrong for many reasons,” said Mark Gibbas with Weather Source. He explained that “changes in the land surface can happen due to significant storms, earthquakes, slow uplift or subsidence, or can happen as part of a major construction project. Producing accurate flood maps should not be done by a single party and certainly not solely done by the U.S. government. I believe we would be better served by having a number of qualified groups involved in producing flood maps. The schedule for producing flood maps should be at least yearly.
homeowners in these areas need to have appropriate and adequate insurance.”
Markow, with Quality Claims, said that “flood maps should be updated at least annually but, more importantly,
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“Flood insurance traps homeowners in a situation no one wants to be in: forced to rebuild in a location that will inevitably flood again. It’s time to start helping people move to higher ground, rather than make them wait for the next flood,” said Rob Moore, a senior policy analyst with the Natural Resources Defense Council (NRDC). The NRDC wants to change “the mindset of ‘flood, rebuild, repeat,’ to buying out homeowners who no longer want to rebuild on a vulnerable property.”
Change, “over the past three decades approximately 1.3 million people have relocated through managed retreat, which pales in comparison to this century’s projected displacements.” “Local governments, not property insurers, make coastal land use decisions,” explained Michael Barry with the Insurance Information Institute. “It is a difficult issue for local elected officials to grapple with because residential and commercial development boost a local government’s tax base. At the same time, however, state and federal governments are often allocating monies to buy homes which are repeatedly flooded. These homes are often demolished to make way for passive parks. A few examples come immediately to mind: New York State’s purchase of Sandy-damaged properties in Staten Island and FEMA’s bid to do the same in Houston after Hurricane Harvey.”
At least some in Congress agree with the concept.
“We have these repetitive loss properties,” U.S. Rep Jeb Hensarling, R-Texas, told CNBC. “So for example, we have one property outside of Baton Rouge that has a modest home worth about $60,000 that’s flooded over 40 times. The taxpayers have paid almost half a million dollars for it.” Buying vulnerable properties is a real option, what’s called “managed retreat.” According to Nature Climate
“State and federal governments are often allocating monies to buy homes which are repeatedly flooded. These homes are often demolished to make way for passive parks. A few examples come immediately to mind: New York State’s purchase of Sandy-damaged properties in Staten Island and FEMA’s bid to do the same in Houston after Hurricane Harvey.” MICHAEL BARRY HEAD OF MEDIA AND PUBLIC AFFAIRS INSURANCE INFORMATION INSITUTE
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MY TAKE
Blurred State Lines Benefit SFR Investors
BY KEVIN ORTNER CEO, RENTERS WAREHOUSE
what was once an arduous task that represented considerable risk is fast becoming commonplace. Reaching outside of their own local marketplace is becoming the preferred course of action for many investors and landlords; and in most cases, isn’t that dissimilar to the prospect of managing property in their own hometown.
The freedom of long-distance investing opens up significant opportunities for institutional investors and everyday landlords alike; chiefly, the ability to take advantage of markets that are better than what’s available in their own local vicinity. Taking advantage of the wealth of diversity in various markets across the states allows an investor to handpick investments with
The lines are becoming increasingly blurred when it comes to local versus out-of-state real estate investing. Thanks in large part to advances in technology that allow investors to find — and easily assess — the performance of out-of-town rental properties, as well as the range of management options that landlords and investors have at their disposal,
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BLURRED STATE LINES BENEFIT SFR INVESTORS
SINGLE FAMILY RENTAL RETURNS BY COUNTY: 2018 2.3% 28.6%
CLICK HERE TO VIEW INTERACTIVE VISUAL
foreclosure rate during the 2008 subprime meltdown, you might have wanted to buy property in a market where median sales prices remained relatively stable, like Charlotte, North Carolina.” But in addition to the chance to earn a higher ROI, long-distance investing also gives investors the option to diversify. Investing in properties located across state lines can serve as a safety net; allowing investors to pad out their portfolio with a range of assets that add a measure of protection from local and isolated market fluctuations. At the end of the day, diversifying is a safer strategy — and something that investing in multiple markets allows investors to benefit from. Outsourcing Property Management Getting started with long-distance SFR has never been easier.
“The ability to invest in up-and-coming markets that may be better than what’s available in one’s own backyard is one incentive for investing across state lines. Out-of-state properties often offer a better ROI than anything that’s available in an investor’s hometown.”
the greatest potential; allowing them to grow their portfolio far more quickly than they’d be able to if they were limited to the pool of properties in their own hometown. At Renters Warehouse, we’re proud to support investors who are looking to invest in out-of-town properties. Our team provides on-the-ground local support; making it far easier for investors to outsource the nitty- gritty daily activities of property management; freeing them up to instead focus on growing their portfolios.
markets that may be better than what’s available in one’s own backyard is one incentive for investing across state lines. Out-of-state properties often offer a better ROI than anything that’s available in an investor’s hometown. “People who live in depressed areas but don’t want to move for work or personal reasons may be better off renting in their hometown and investing in real estate where the economy is stronger,” writes Amy Fontinelle, financial journalist and personal finance expert, highlighting the value of long-distance SFR investing. “For example, if you lived in Las Vegas, the city with the highest
Benefits of Long-Distance SFR The ability to invest in up-and-coming
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BLURRED STATE LINES BENEFIT SFR INVESTORS
Having a team on-call and able to respond to any issues that arise at the rental at a moment’s notice is ideal — and something that investors can assemble themselves by seeking to form connections with local tradesmen and real estate agents. However, the easiest option by far is enlisting the services of one professional to oversee all aspects of property management. Having a dedicated and on-call professional property manager to be your eyes and ears on the ground can prove to be invaluable and is something that many investors are making a central part of their investment strategy.
For what’s generally a flat monthly fee, investors can offload a time- consuming task and gain peace of mind knowing that their property manager will be taking on all of the chores that would otherwise require the full-time presence of a landlord repairs, and handling emergencies. A dedicated professional can take most of the work out of SFR rental management. Hot Markets for SFR While investors can browse websites like Zillow and Trulia to gather insight into how different markets — including filling vacancies, collecting rent, arranging for
are performing, it’s always worth connecting with a local real estate agent; someone who’s familiar with the market and able to provide firsthand information on the current rental climate. An investor-friendly Realtor will also be able to set an investor up with an MLS listings search; notifying them as soon as a property that meets their criteria hits the market. for SFR investors in markets that were not part of the “first wave” of institutional investment in the sector. During the first wave, markets like Atlanta, Charlotte, Dallas, Phoenix, Jacksonville and Orlando attracted unprecedented capital from institutions, but have caused many investors to seek opportunities off the beaten path. According to OwnAmerica, 2019 and 2020 will present new opportunities
“Having a dedicated and on-call professional property manager to be your eyes and ears on the ground can prove to be invaluable and is something that many investors are making a central part of their investment strategy.”
MEDIAN HOME PRICES AND FAIR MARKET RENTS
MEDIAN HOME PRICE FOR SINGLE FAMILY HOMES AND CONDOS
AVERAGE HUD FAIR MARKET RENT FOR 3-BEDROOM PROPERTY
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
SOURCES: ATTOM DATA SOLUTIONS, HUD
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BLURRED STATE LINES BENEFIT SFR INVESTORS
Cities like Memphis, Denver, Philadelphia, Pittsburgh, Columbus, Charleston and Detroit make the list of new markets attracting investors of all sizes. As macroeconomic drivers change, new geographies come into focus for the second wave. Investors can also use real estate data analytics company HouseCanary’s helpful rental index tool to analyze a prospective property’s performance — no matter where it’s located. With this tool, investors can see the effective gross yield for rental properties across each of the 50 states, or even check the yield of individual metropolitan areas. Of course, extremely hot markets may be largely out of the reach of everyday investors. For more promising SFR investment opportunities, investors would be wise to heed HouseCanary’s advice on sizing up potential investments, and look for opportunities in niche, but promising markets.
“Homes located near good schools and public transportation, homes located near significant local landmarks or attractions, and homes with attractive attributes and features are often able to rent (or sell) for above the local average fair market value,” Alex Villacorta, HouseCanary’s executive vice president of analytics, recently told Forbes contributor, Ellen Paris. “That’s why even in areas with low EGY (effective gross yield) relative to the national average, you can almost always find homes that have higher-than-average EGY.” The availability of “diamond-in-the- rough” single family rentals is evident in the 2018 Neighborhood Housing Index published by ATTOM Data Solutions, which analyzed nearly 11,000 U.S. neighborhoods based on neighborhood quality (i.e. schools, crime etc.) along with potential yields for single family rentals.
neighborhood quality — those neighborhoods were assigned an “A” rating — there were 494 with an annual gross rental yield of at least 10 percent, led by neighborhoods in Fayetteville, North Carolina, Sarasota, Florida, York Pennsylvania, Tampa-St. Petersburg, Florida, and Louisville, Kentucky. No matter what market you’re buying in, it always pays to be extra diligent when searching for an investment that will perform well. Never operate on assumptions, and don’t neglect to run the numbers; always ensure that they’re in line with your investment goals. At the end of the day the success of your investment will depend upon the viability of your individual purchase — so look to buy property that’s undervalued, or work to negotiate a deal so that the terms will put your projected net returns within your investment criteria.
ATTOM found that among 2,188 neighborhoods with the highest
RENTAL RETURNS BY NEIGHBORHOOD A B C D F
KEVIN ORTNER
Kevin Ortner is the President and CEO of Renters Warehouse, one of the fastest-growing and highest- reviewed residential property management companies in America. Kevin is the author of Rent Estate™ Revolution, which shares the Renters Warehouse philosophy and business expertise around single-family rentals and the power of Rent Estate to drive long-term wealth creation, retirement security and financial freedom for the everyday person.
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BIG DATA SANDBOX
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DATA IN ACTION
Where to Buy Homes with Least Natural Hazard Risk
Real estate investors who want to avoid property damage caused by natural hazards should be looking in the Rust Belt, according to the ATTOM Data Solutions 2018 U.S. Natural Hazard Housing Risk Index. For the report ATTOM indexed natural hazard risk in more than 3,000 counties and more than 22,000 U.S. cities based on the risk of six natural disasters: earthquakes, floods, hail, hurricane storm surge, tornadoes, and wildfires. ATTOM also analyzed housing trends in 2,616 cities and 440 counties
— containing more than 53 million single family homes and condos — broken into five equal quintiles of natural hazard housing risk (view full methodology). Homes selling at 4.4 percent discount in lowest-risk markets Among the 440 counties with sufficient housing data, those with the lowest natural hazard housing risk were Milwaukee County, Wisconsin, Muskegon County Michigan, Cuyahoga County/ Cleveland, Ohio, Kenosha County,
Wisconsin in the greater Chicago metro area, and Monroe County/ Rochester, New York. Homes in counties in the bottom 20th percentile for natural hazard risk have a median sales price so far in 2018 that is 22 percent lower than the median sales price for all counties nationwide. Also, homes in those lowest-risk counties are selling at a 4.4 percent discount on average below their estimated full market value at the time of sale.
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TOP MARKETS FOR MOVERS IN Q3 2018
Home prices appreciated 1.6 times faster in highest-risk markets On the other end of the spectrum, counties with the highest natural hazard housing risk were Oklahoma County, Oklahoma, Monroe County/ Key West, Florida, Santa Cruz County, California, Santa Clara County/San Jose, California, and Marin County, California in the San Francisco metro area. The ATTOM analysis found that median home prices in cities with the top 80th percentile for natural hazard housing risk have appreciated 39 percent on average over the last 10 years — 1.6 times the 25 percent home price appreciation in the overall U.S. housing market during the same time period. “While combined natural disaster risk has not seemed to hobble home price appreciation over the past decade, the story is much different for some individual hazard risks — namely flood, hurricane storm surge and wildfire risk,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Home price appreciation in the overall U.S. housing market was double the rate of appreciation in cities with the highest flood risk and triple the rate of appreciation in cities with the highest hurricane storm surge risk over the past 10 years. The broader market has also outperformed appreciation in cities with the highest wildfire risk during the last decade, although the gap is much narrower.” Foreclosure rates elevated in highest-risk flood cities Foreclosure rates were lower in cities in the top 80th percentile for natural hazard housing risk, and this was true for all individual natural hazard risk
types except for flood risk. In cities in the top 80th percentile for flood risk, active foreclosures represented 0.61 percent of all properties, well above the foreclosure rate of 0.38 percent across all risk categories. “Weather is the largest external swing factor in U.S. economics and accounts for over $550 billion per year in lost revenue and up to 76,000 lost jobs,” said Mark Gibbas, president and CEO at Weather Source, a technology company that provides global weather and climate data along with advanced analytics. “Weather can have an enormous impact on homeowners and the housing market. When big weather events such as hurricanes, tornadoes and hail hit, many homeowners suffer financial hardship from various sources
such as lost wages and losses due to inadequate insurance. And while the impact on homeowners can be severe, hurricanes like Harvey can change the landscape of the housing market region-wide, including shifts in the number of available homes and shifts in home values.” Cities with the highest flood risk also posted seriously underwater rates (loan-to-value ratio of 125 percent or higher) above the overall market average — 8.9 percent of all homes with a mortgage compared to 8.5 percent nationwide. Tornado risk was the only other individual natural hazard risk factor with seriously underwater rates above the market average in the highest risk cities — 10.0 percent of all homes with a mortgage.
“Weather is the largest external swing factor in U.S. economics and accounts for over $550 billion per year in lost revenue and up to 76,000 lost jobs. Weather can have an enormous impact on homeowners and the housing market.”
MARK GIBBAS PRESIDENT AND CEO, WEATHER SOURCE
2018 NATURAL HAZARDS HOUSING RISK HEAT MAP RISK CATEGORY VERY LOW LOW MODERATE HIGH VERY HIGH
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SECTION TITLE
Know the Risks and Benefits Before You Buy Your Next Home A Home Disclosure Report provides comprehensive property and neighborhood data that will help you make a better decision about the home you want to buy.
Criminal & Sex Offenders Former Local Drug Labs Nearby Hazardous Sites
Local School Ratings Property/Loan Information Neighborhood Demograhics
“I can research homes and neighborhoods like never before. Great data for negotiating with the seller!” G. BUSBY, HOMEOWNER - CHICAGO
Get your FREE Home Disclosure Report at www.homedisclosure.com
16
OCT 2018 | ATTOM DATA SOLUTIONS
HOUSINGNEWS REPORT
Housing News Report is a monthly publication dedicated to helping individuals and institutions succeed by providing them with timely and relevant information about the residential real estate market.
EXECUTIVE EDITOR Daren Blomquist
CONTACT US Phone: 800.306.9886 Email: marketing@attomdata.com Mail: Housing News Report 1 Venture suite 300 Irvine, CA 92618
WRITERS Daren Blomquist Peter Miller Joel Cone
ART DIRECTION Eunice Seo
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