HOUSINGNEWS REPORT
REAL ESTATE INSURANCE: FENDING OFF DISASTER IN A CHANGING WORLD
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
4
OCT 2018 | ATTOM DATA SOLUTIONS
Made with FlippingBook Online newsletter