The real estate market is in a constant state of fluctuation, especially in complicated markets—such as the one we have in Houston. Then, throw in a 500-year catastrophe such as Hurricane Harvey, and you have on your hands a situation like no other. And, with a city as spread out and diverse as Houston, every situation is unique.
Some neighborhoods did not flood, some neighborhoods flooded except for a few homes, and some were completely underwater. And in each neighborhood, there were people who had just moved in, who were getting ready to sell their home, or who had been living there most of their lives.
Monday morning, September 18, Circa Real Estate attended a panel hosted by Frontier National Title – Galleria, featuring local home appraiser Mike Brubaker of Brubaker and Associates to discuss the changing real estate environment in wake of the 2017 Harvey disaster. Afterwards, our marketing team sat down with Circa Real Estate broker/owner Mary Wassef to discuss her thoughts on the changing market. The big takeaway is that right now, most everything is up in the air—but here are a few things we do know about Houston’s real estate for the next few months:
There will be “sick homes” on the market. There will be people who are in a rush to fix their homes and will be skipping the necessary steps needed to ensure their home is rebuild properly.
“This is my biggest fear right now,” says Mary Wassef. “As my client’s representative, I know that I will be asking for mold certificates, permits, and proof that they did the work the right way. And if a home owner can’t show that they didn’t do a rush job of rebuilding their home, I will strongly encourage my clients to look elsewhere.”
When rebuilding your flooded home, it can take 4-5 weeks for base plates to return to pre-loss levels if professional drying is not implemented. According to Darryl Riddle of 877QuicDry, base plates need to be in about 16% to 19% moisture in the center of the plate and slabs before any reconstruction begins.
“This figure is confusing for many using their own meters,” Darryl says, “because most meters only read the surface of the wood, which is constantly evaporating and showing a lower moisture content. Standards require the use of a hammer probe to ensure the reading deep within the wood is adequate.”
Darryl also said that concrete foundations remain wet and continue to feed moisture into the base plates long after the plates seem dry. If the concrete slab is wet when the walls are rebuilt and closed, the evaporation of the migrating water at the surface will be vastly reduced compared to when the walls are open and fans are running, potentially leading to a surface moisture or condensation condition that could facilitate a mild to moderate mold issue.
“Focus the majority of your fans on the exterior walls of your home,” Darryl suggests. “And whatever you do, don’t try to hang up drywall before you are confident that your home is dry—or you will be looking at a few inches of black mold growing along the base of your walls in the next few months.”
Volume of homes listed for sale will trickle off. Mike Brubaker told the guests at Frontier Title’s Post-Harvey Panel that he expects a decrease in volume of listed homes.
“People are busy,” Mike explains. “People are busy rebuilding their lives, and rebuilding their homes. We can look back at Ike—we can go back all the way to Carla and see that quick decrease in activity after a major weather event.”
Mary Wassef believes the same as the city recovers from the flooding. “I think that current inventory will be eaten up,” she says, “but I don’t think that a ton of people will be putting their house on the market right now.”
For the next 90 days, appraisers will have no data. Mike says that appraisers are data-driven professionals. And the question every appraiser is being asked is, “What is my home worth now, after Harvey?”
“Appraisers are required to use comparable sales,” Mike explains. “And right now, we have a line in the sand: Pre-Harvey Sales and Post-Harvey Sales. Do you know what any post-Harvey home is worth right now? We don’t, because all of our data is Pre-Harvey.”
Mike says that even when a house does sell immediately following Harvey, this wouldn’t necessarily reflect the home’s true value. It “depends on distress,” Mike says. “There are some people who are making emotional decisions based on their experience during the flooding. There are some people who won’t mind taking a loss to get out of their home.”
“Their home has failed them,” he explains. “The place that gives them shelter, protects them, and shields them has failed them. And if this isn’t the first time they’ve lost everything, they will do what they need to do to get out.”
Mike said that appraisers will most likely use Pre-Harvey data and add a comment in the margins of the appraisal report: “I don’t know.” Some appraisers may take the depreciation ratios from after Ike and apply a “discount” to home values, but Mike said that it is all guess work, and there is no perfect equation.
Values may depend on the neighborhood’s flooding, not just the home. If most of the neighborhood flooded—even if the one home you are trying to sell didn’t—you may see some negative effect in your home’s value.
“I think it’s really going to be decided on a neighborhood-by-neighborhood basis,” Mary says. “Some neighborhoods, after this disaster, are going to be scarred, and that will affect the value of the homes there. I believe, for many years to come, people will have more things to factor into their buying decisions, such as flood history, location of nearby dams, and where reservoirs empty out into.”
Mary did say that inner loop neighborhoods that did not see a lot of flooding will likely benefit from the situation.
The biggest takeaway is, Houston: You need flood insurance. Harris County is a flood zone, and it will be worth it in the long-run to make an investment that can save you thousands down the road. And, will your home sell? The greatest answer in this climate is: “It depends.”
If you are interested in buying or selling a home, Circa Real Estate has 28 agents that are ready to help you navigate this difficult market. Give us a call and we will match you with the best agent to fit your needs.
Source: Pre-Harvey Real Estate Market Panel hosted by Fidelity National Title – Galleria, and presented by Brubaker & Associates of Houston. Additional comments provided by Mary Wassef of Circa Real Estate.