The catastrophic flooding that has wrought havoc on more than a dozen Midwestern states—claiming at least four lives, displacing thousands, and causing perhaps more than a billion dollars in damages—will also upend local real estate markets, perhaps for years to come.
The flooding, caused by a deadly combination of heavy rains and large accumulations of snowmelt overwhelming rivers, will likely continue through May as the weather warms up, meteorologists say. Flood warnings have affected more than 8 million residents in 14 states.
The devastation was so extensive that Vice President Mike Pence traveled to Nebraska and Iowa on Tuesday to take stock, along with the governors of those states.
“The hearts of the American people are with those who have been impacted across the Midwest!” he tweeted from Omaha.
Beyond the vast, immediate human toll, the flooding is expected to place substantial long-term pressure on real estate markets that are already experiencing their share of challenges, including shortages.
Homes and neighborhoods that were ravaged by water, similar to wildfires and hurricanes, are likely to lose value as buyers seek higher ground. Untouched areas suddenly become more desirable. Meanwhile, the already limited supply of affordable housing, particularly rentals, is likely to dry up as folks whose homes were ravaged compete for replacement housing.
“The overall flooding will continue all spring,” says meteorologist Andy Foster of the National Weather Service. But although this is a major disaster, the region has experienced bad flooding before, such as in 1993, 2008, and 2011. “For some areas, the worst is over. In other areas, it’s getting worse. … It really depends on where you are and what river you’re on.”
‘I’ve never felt helpless like this before’
For many of the residents living through it, the storm is a life-changing event.
Shawn Starry, 45, and his wife are currently living in an evacuation center—sleeping on cots in the cafeteria of a community college—after their three-bedroom home in Freeport, IL, was flooded with 4 to 6 feet of water. Their two dogs are in an animal shelter.
“The house is gone. All of our stuff is gone,” says Starry, a security guard. “My couch, my personal effects, all [of] my wife’s kitchen stuff is floating in water.”
He lives about two blocks from the overflowing Pecatonica River.
He’s hopeful that financial assistance from the city will be enough to get himself and his wife out of the evacuation shelter and eventually into a new home. That would enable his 16-year-old daughter, who’s currently staying with her older sister in Colorado City, CO, to come back home.
“I’ve never felt helpless like this before,” says Starry, who lost one of his cars in the flooding. “I don’t know what we’re going to do. … [If the money doesn’t materialize,] we’re going to be on the streets.”
Homeowners in others states also suffered steep losses. Nebraska Gov. Pete Ricketts told reporters on Monday the flooding was “clearly the most widespread disaster we have had in our state’s history.”
Plumber Justin Cash, 35, considers himself fortunate. His four-bedroom home in Fremont, NE, outside Omaha, escaped the 3 to 4 feet of flooding that swamped his neighbors’ homes downhill. But his wife and children have been virtually trapped in the home since last week, when the floodwaters overtook the lane from his house to the main road.
“It got pretty close,” he says of the water, which got within 50 feet of his home.
He expects he’ll be out a few thousand dollars purchasing crushed concrete to make the swampy lane from his property to the main road drivable again.
“Our house and our family is OK,” says Cash. “So I consider us lucky.”
A home in Hamburg, Iowa
Scott Olson/Getty Images
After a flood: What happens to local real estate markets
The nightmare isn’t finished once the floodwaters recede. Some would say the real pain is just beginning.
“It’s going to be bad. There’s no way to sugarcoat it or understate it,” says real estate appraiser Randall Bell, who runs the Landmark Research Group. He’s worked all over the country assessing properties damaged by natural disasters.
After a flood, homeowners can face repair costs topping $100,000. Oftentimes, not all of that is paid out by flood insurance claims or the Federal Emergency Management Agency. There’s also generally a lag in how quickly those checks are cut.
Those who decide to rebuild need to find alternate accommodations until their homes are inhabitable again, and that isn’t cheap.
“While they’re gone, they still have to pay mortgages, property taxes, and other costs,” Bell says. Meanwhile, the cost of temporary housing typically goes up in response to surging demand. “Some people gouge and double and triple their rent.”
And then they have to worry about their home carrying the stigma of flooding.
“There’s no question that a property with a flooding history can be looked at negatively,” says Bell, adding that buyers “don’t want to pay full value with this flood risk.”
Just how much the home is discounted depends on a host of variables: Has the property or the community flooded before? Has the home been elevated? Have actions been taken to deal with future flooding?
Areas that weren’t touched by the disaster and sit on higher ground suddenly become very popular with buyers who have been displaced, while values in flood zones plummet.
And when it comes to rebuilding efforts, floods present long-term challenges that are different from other disasters, like wildfires. “With a flood … the land itself is tainted,” says Bell. “It can’t be fixed with boards and nails and drywall.”
Says real estate broker Jennifer Bixby of Don Peterson & Associates Real Estate, in Fremont, NE: “Right now, we’re still trying to assess the total damage, whether homes are completely uninhabitable or if we can fix them up before the mold starts growing. We already have a housing shortage in town. This is obviously going to magnify this issue.”
Those with means whose homes are uninhabitable are already scouring the market looking for untouched homes for sale, she says. Those who can’t afford to buy until their insurance checks come in will likely be looking for rental housing nearby.
Some untouched Midwestern communities still fear the worst
The devastation is expected to get worse before it gets better.
Fargo, ND, is bracing for flooding as the weather is expected to warm up into the 40s, melting the high snowdrifts. Mayor Tim Mahoney declared an emergency and asked locals to fill 1 million sandbags starting next week.
“If we get too fast of a melt, everything will head to the rivers,” says Vicky Matson, president of the Fargo Moorhead Area Association of Realtors. She’s helped with previous efforts to stuff sandbags—she even threw out her elbow the last time, in 2011. This year, she plans to help out on the lunch committee.
“Right now, I’m saying a lot of prayers,” she says.
The post The Floods Ravaging the Midwest Will Wreak Havoc in Housing Markets, Too appeared first on Real Estate News & Insights | realtor.com®.
Source: Housing Trends Feed