Hurricane Irma’s Effect on the Florida Housing Market
According to the National Oceanic and Atmospheric Administration (NOAA), Hurricane Irma was ‘downgraded’ to ‘Tropical Storm’ Irma shortly after reaching Florida. I’m not sure ‘downgraded’ is the correct word here. Perhaps ‘wounded but still deadly’ would be more fitting.
Below is Irma by the Numbers (provided by NOAA):
- 70,000 square miles impacted by Hurricane or Tropical storm force winds (The State of Florida is 65,000 square miles)
- The top strength of Irma’s maximum sustained winds was 185 miles per hour. Bigger, faster and stronger than Hurricane Andrew, which struck Florida in 1992.
- Irma lasted 3.25 days at a Category 5 hurricane – the longest for an Atlantic hurricane.
- 15 million people without power in Florida, 1.3 million in Georgia
- 65% of houses in Florida Keys were damaged and 25% were destroyed.
- 6.3 million people evacuated from Florida (the largest in US history)
- $100bb in economic losses and damages (source: AccuWeather)
Thankfully, observations from Harvey made most Floridians extremely cautious and prudent, resulting in increased preparations and evacuations, and reduced damage and loss of life. A short text from Tony Polito, Metrostudy’s Research Director for Tampa and Sarasota, exemplifies most Floridian’s situation: “…power has been out since Sunday evening. May be a week before it is restored. A lot of trees down from wind. Can’t recharge iPad so only check email twice a day.” Thankfully, Tony and other Metrostudy team members in Florida are accounted for and relatively safe, but the aftermath on Florida’s housing markets may be more impactful and longer lasting than Harvey in Houston. Why?
Whereas Houston has been slowly rebounding for the recessionary impact of low oil prices and reduced domestic oil production, most Florida markets have been experiencing a surge in economic growth – partly due to a surge in retirees relocating to Florida and vacationers visiting Florida. Below are recent comparative 12-month job growth rates:
Florida’s economies have been performing extremely well, and the housing markets were trending upward before Irma. Most Florida housing markets have lagged the overall national housing recovery, but most were hitting their stride just before Irma hit.
Houston’s economy, which is less dependent upon Leisure and Hospitality and more dependent upon Distribution (think ‘oil’), Business Services, Trade, Transportation and Utilities, is likely to spring back more quickly as many of these jobs impact, not only the local economy, but also the national infrastructure. Jacksonville and Tampa have similarities to Houston in this regard, but markets like Orlando and Sarasota tend to be more influenced by vacationers and retirees:
Though not fully reflected by the comparisons above, Miami’s cruise industry will be hammered – at least for a while. Such devastating storms cause retirees from cold-weather states to think twice before relocating to Florida (probably to Arizona’s and Nevada’s benefit). And vacationers and cruise-goers will also think twice before visiting Florida. The result may be more and longer lasting detriment to Florida economies (especially Orlando, Sarasota and Miami) than for Houston’s economy. Jacksonville and Tampa, which have more diversified economies and major ports, may recover at a faster pace than Orlando, Sarasota and Miami, though slower than Houston due to some dependence upon a damaged agricultural base. Florida’s agricultural economy has been damaged throughout the State. Expect to pay more (a lot more) for oranges. Construction employment will surge throughout the State, but the construction labor pool is already very limited in Florida, and repair/renovation activity will likely slow the completions and deliveries of new homes for the next few quarters.
Conclusions? Florida’s economy is gut-punched by Irma. Look for a greater negative impact and a slower recovery for Florida’s economies and housing markets than for Houston. Look for slower economic recovery in Orlando, Sarasota and Miami than in Jacksonville and Tampa. The new home market will be inhibited to a greater degree in Florida (especially in Orlando, Sarasota and Miami) than in Houston. Still, most Florida housing markets remain under supplied, and in most cases, represent much stronger values than most markets throughout the nation. Florida’s housing market is down, but is certainly not out. Despite the anticipated negative impact and slow recovery during the next few quarters, Year 2018 is still predicted to be a strong housing market year in Florida…unless another hurricane hits.