By 
In the wake of Hurricane Katrina’s long track record of destruction, the real estate market will be affected perhaps in ways that are not fully understood or expected. If the recent hurricane recovery story is true, there will be several good things to come from all the destruction. Let us hope so, as those who live in the Delta region have suffered immensely.
In September 1989, a strong Category 4 hurricane named Hugo made landfall in the Charleston, South Carolina area. Up to that point, it was the strongest hurricane to strike the continental US since Camille struck the Gulf Coast in 1969. The damage caused by Hugo was extensive, with entire forests leveled and fishing and resort towns severely affected. damaged. Dire predictions were made about the negative effect of the storm on the local economy. I know, because I was living in the nearby town of Goose Creek when Hugo roared past; I witnessed a sustained and prolonged recovery effort for many months thereafter.
These were some of my personal observations on the impact of that hurricane on the real estate market:
1. Destroyed housing stock. Yes, the number of mobile homes, apartments, and single-family homes damaged or destroyed by Hugo was large. What had been a fairly open real estate market before the hurricane quickly tightened as the vacancy rate plummeted to near zero as all available, good-standing properties were suddenly sold. Rental rates, which had been on the low side, suddenly shot up and stayed high even as the housing stock replenished over the next year. The net effect of Hugo was that older, substandard homes were replaced with newer homes built with the latest building code requirements included. Rental rates have increased accordingly to reflect the improvements.
2. Insurance payments. Although the property I lived in was not damaged much, some of the houses in our neighborhood did. Within days of the storm’s wake, insurance agents toured neighborhoods, filing claims and writing checks on the spot. The rapid movement of insurers allowed people to burn out and make the necessary repairs quickly. Often the amount of the check more than covers the actual damage, allowing homeowners to make both structural and cosmetic improvements to their properties. These improvements were credited with driving the subsequent rise in local house prices.
3. Government assistance. FEMA cuts its teeth with Hugo. Originally, FEMA received a lot of criticism due to the agency’s slow response to the disaster. It took several more disasters after Hugo before FEMA’s response time improved. Still, where private insurance companies left off, FEMA stepped in by cutting checks that allowed people to rebuild. Essentially, FEMA stepped in to help the uninsured and underinsured get back on their feet. Many houses that had been substandard before Hugo were replaced with houses that met today’s standards. [and stricter] housing codes. The impact on the housing market was felt when this rising wave of support effectively pushed up house prices.
The impact of each particular storm on a local economy is different. Unfortunately for residents of the Delta region, Katrina was overlooked after a particularly tough hurricane year in 2004. No, FEMA is not bankrupt, but the financial stress on insurance providers is still hard to gauge. Unlike Hugo, where the recovery effort began immediately after the storm left, the Delta region is still in rescue mode and waiting for the waters to recede. I’m sure it will be weeks before any sustained recovery effort can be started and even then it will be a long drawn out process as insurance claims are filed, local building codes are re-examined and most importantly: people – decide whether they want to rebuild in damaged communities or move.
South Florida rebounded fairly quickly after Hurricane Andrew devastated Homestead in 1992, but many communities in central and pan-Florida are still reeling a year after a series of hurricanes tore through their homes in 2004. Again, much will depend on individual families willing to rebuild and that’s the old story after Hurricane Katrina.