Harvey attacked the very Heart of homeownership in Houston. Harvey left some mean footprints on the housing market in Houston. The category 4 Hurricane slammed the Houston metro area with 9 trillion gallons of water.
The US has battled more than the usual share of wind, rain and fire in the closing months of 2017.
At Palm State Mortgage we wonder what lessons we have learned from the 2017 disasters.
- How could government and communities respond better to homeowners?
- What can insurance companies do about the massive number of homeowners who won’t buy flood insurance?
- How will Harvey’s hit impact the housing markets– at both the state and federal levels?
Yes, we have questions.
Experts have used the weeks since Harvey’s catastrophe to collect, collate and coalesce facts and statistics. They have also analyzed public and private response to the disaster.
With time and thought, we will learn more details about the ways government and community responds to catastrophes.
Palm State Mortgage hopes we will discern how we might best improve homeowners’ recovery from natural disasters. And we want to see how to minimize negative impact on the housing market itself.
The Housing Market: Thriving on the Dream of Homeownership
Thus, we introduce a two-part series on this blog topic. Palm State Mortgage Company is intent on revealing what
lessons our government and society can learn from the hurricanes and disasters of 2017. Then we want to know how those lessons impact the entire philosophy of home ownership.
Thus, although it has its own independent title, as above, Palm State Mortgage introduces this article as:
Part I of our Topic, “Lessons from the Storms: Mortgages, Government and Homeownership.”
Now experts are putting together theories about how the storm has impacted the housing market in Houston. Palm State Mortgage Company believes that understanding some of these theories will assist us here in Florida.
Indeed, we are already fiscally bracing for the continued financial impact of Irma on our housing market and mortgage industry.
Homeownership: Stained by Floodwaters
With a growing economy and somewhat relaxed building standards, before the storm, Houston ranked high rank in new construction.
In fact, “Houston has often been among the top three cities for new construction.
In 2016, Houston’s 44,732 residential building permits put it behind only Dallas.”
However, sales of flood insurance policies in have slipped within the last 5 years, leaving only 7 percent of houses insured. How could this go unnoticed by the financial wizards and mortgage pundits?
And, in the wake of Harvey’s wind, the flooding drowned many of the highest homeownership areas of the region. This does not mean the richest homes, but in many cases it means the newest homeowners.
CoreLogic, a primary analytics company, reported that 70 percent of the damage from flooding is uninsured. Therefore, we conclude that homeowners are more likely to be financially hurt than renters.
On the other hand, renters will also feel the brunt of the economic storm as they compete for space with new renters.
Meanwhile, new renters are demanding short-term leases while they build or repair their homes. As we watch the new growth of replacement houses, we feel grim pride.
It seems the value of Texas homeownership cannot be permanently tarnished by the stains of flooding.
Homeownership Defiled by Property Value: Houston’s Newest Homeowners Fighting Negative Equity
The hurricane did not pick on only established or upscaled neighborhoods, however. It invaded areas with the lowest equity, and the most to lose. New neighborhoods were put at great risk.Upon the departure of the storm and beyond the clean-up, the next villain was not in the weather report: An insidious downturn in home values tugged the purse-strings and heart-strings of victims who cherished their homeownership.
The Urban Institute reported simplistically, “Many homes could soon slip into negative equity as home values in the area drop.”
At Palm State Mortgage, we know it will be many years before blighted neighborhoods recover completely and proper value is gained by those ravaged areas. From our vantage point in Florida, it is likely this is also true for the property values of areas and coastlines devastated by Irma.
Palm State Mortgage feels very badly for the owners, both insured and uninsured, of destroyed homes. Sadly, those who cannot afford to rebuild will lose all their equity. They will hopefully find ways and means of recovering financially.
We can only hope that they and the newcomers to homeownership realize the value of their home equity. And, we hope they read the fine print of their insurance policies.
Insuring Your Homeownership: An Important Note about Insurance
Experts agree flood insurance will have a big role in shaping what happens to home equity in the area. As you probably now know, “traditional homeowners’
Thus, the lack of flood insurance could damage the homeownership dreams of “households just starting to accumulate wealth in their homes.”
The Government’s Role in Rescue for Homeowners: An Important Note on FEMA and SBA:
FEMA gives some short-term housing assistance and some support for other disaster-related expenses. However, did you know that a homeowner must have the approval of an SBA application and a housing inspection before applying for approval for FEMA help?
Without insurance, even if they have FEMA, storm victims often must resort to new loans to make true recovery.
Authorities might approve funding, but not enough of it. They then re-direct applicants to SBA loans to finance the rest of their massive expenses for long-term recovery.
Hurricane Harvey Hammered Everyone: It Was an Equalizer, Good or Bad
No income level, geographically situated area or special type of property was spared Harvey’s assault. Whereas Katrina affected low-income communities, Hurricane Harvey swept away properties from every income bracket, social status and architectural type of building.
Therefore, experts believe the city will be making a faster economic and housing market recovery than New Orleans of 2005. The upscale areas are already generating fast-paced, high-energy come-back.
Can those Champions of Homeownership, the FHA, Roll with the Punches?
Borrowers with FHA-insured government loans were heavily affected. Many of the homes wrecked by Harvey were insured by FHA loans. In fact, some neighborhoods reflect a 25-50 percent share of the loans originating from FHA. Palm State Mortgage Company and many other experts fear this concentration of FHA loans could overwhelm the FHA budget.
We know, because Floridians will be the next in line for the same type of FHA help, by virtue of the violence of Irma.
The FHA Shelters Homeownership Wherever Disaster Strikes
These natural disasters have occurred just at a time when “HUD funding faces potential budget cuts, and the overall health of the FHA mortgage insurance fund is just recovering.” (We’ll see next week how the problem is not always the amount of money–money can be there, but problems still happen.)
Of course we know there will be a large number of loan defaults and delinquencies in the aftermath of both Harvey and Irma, as well as Maria and the recent California fires. The FHA and HUD are going to be very important players in the recovery of many communities.
Fiscal Experts’ Advice to Government: Defend Homeownership
“To help restore a healthy housing market, HUD must be engaged, flood insurance issues must be addressed, newer homeowners who have lost equity must receive special attention, and efforts toward opening the credit box must continue.”
They add, “All parts of the housing finance ecosystem need to be engaged and responsive and learning from this effort.”
Despite the best efforts of the human race, Palm State Mortgage Company reminds you that we must still defend homeownership from the same enemies fought by cavemen long ago: Wind, Rain and Fire.
Find out how modern man will do that in 21st century USA, next week in Part Two of our coverage of this timely topic, “Lessons from the 2017 Storms: Mortgages, Government and Homeownership.”