Thoughts on Houston floods and the effects on area real estate
Flipper/Rehabber · Arlington, TX · Member since 2016 · 28 posts · 21 votes
Thoughts on Houston floods and the effects on area real estate
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I tend to disagree with the theory that people will leave en-masse. Houston is the 4th largest city in the US for a reason...jobs...and jobs are not going to go anywhere until alternative fuels have been found! If people leave, their jobs will need replacing - that was not the case in Katrina. The Houston market has been incredibly strong and diverse - and has flooded before with no dire residual effects - I predict the same, Houston will rebuild and continue its growth. The short-term effects will be seen by a plethora of homes coming on the market for far less than we have ever seen and on the opposite end of the spectrum with higher/dryer homes escalating in prices - I hate to sound insensitive, but clever investors will have a lot of opportunities.
31 Replies
- 9yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votesFollowing. I'm also willing to help in Houston however I can. PM me if you need anything!
The Moorhead Team5140 Reviews - Austin, TX · Member since 2017 · 11 posts · 9 votes9y
I am interested in this as well.
As far as helping Houston out, here is a link to a donation website organized by JJ Watt.
- Lender · Largo, FL · Member since 2017 · 71 posts · 34 votes9y
I recently asked a similar question and did a little research on Katrina to compare.
The population of New Orleans fell from 484,674 before Katrina (April 2000) to an estimated 230,172 after Katrina (July 2006) — a decrease of 254,502 people and a loss of over half of the city’s population.(1) By July of 2015, the population was back up to 386,617 — 80% of what it was in 2000.
So apparently once a large disaster hits an area, its safe to assume 2 things: 1, people leave en mass. 2, it takes them a long time to come back.
I'm not sure the Houston area will ever be what it once was. Maybe this will make the DFW market explode even further. These people will probably be renting apartment for a couple of years while they get their lives back on track, so maybe its a good time to buy multi-family homes in neighboring cities.
I also assume people will leave the state entirely for fear of hurricanes and possibly move further north. Just speculation, but there were hundreds of thousands of people who flocked to Houston in the last several years and now many of them will be leaving.
- Investor · Los Angeles, CA · Member since 2016 · 69 posts · 46 votes9y
I remember hearing that insurance companies would not cover Houston because it is a flood zone. However I also heard that because of this that the government subsidizes the insurance coverage. I am not sure how true this is though.
On the news I have seen reports of contractors trying to overprice their work due to the demand. This is upsetting a lot of people and these contractors are being confronted when home owners report them.
I tend to disagree with the theory that people will leave en-masse. Houston is the 4th largest city in the US for a reason...jobs...and jobs are not going to go anywhere until alternative fuels have been found! If people leave, their jobs will need replacing - that was not the case in Katrina. The Houston market has been incredibly strong and diverse - and has flooded before with no dire residual effects - I predict the same, Houston will rebuild and continue its growth. The short-term effects will be seen by a plethora of homes coming on the market for far less than we have ever seen and on the opposite end of the spectrum with higher/dryer homes escalating in prices - I hate to sound insensitive, but clever investors will have a lot of opportunities.
- 9yMike ReynoldsPro Memberconstruction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
When Ike hit the Bolivar peninsula it was devasting. Properties went on the market and stayed there for a couple of years. Prices dropped off course. Then everything was back almost normal but the new houses were better built and higher priced
I don't think Houston will do that. I believe they will instead go the other direction. They will get swamped with contractors and as the business opens back up they will have to hire someone. I once read that 75% of goods from overseas comes from Houston/Galveston ports. That's a lot of stuff that needs to be sent out.
Now Corpus area may be a bit slower like NOLA area. But not Houston.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Mike Reynolds I would not be surprised if GOVMIT came up with another GOZONE accelerated bonus depreciation play like they did for Katrina.. that really spurred new construction and rebuilding.. Texas is already tough with contractors since no license is required for GC.. I can only imagine the amount of carpet baggers who will flock in for this. I would not want to be in the fix and flip business there right now.. I would think most GC s will gravitate to insurance work then work backwards.. and us fix and flip guys who need best pricing possible will be last on their list.
@Jay Hinrichs I do have to agree with you on that point! Finding reliable GC's in Houston is already tough enough as it is, and the insurance work (depending on their level of payouts) could very well become the priority.
- 9yMike ReynoldsPro Memberconstruction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
Originally posted by @Jay Hinrichs:
@Mike Reynolds I would not be surprised if GOVMIT came up with another GOZONE accelerated bonus depreciation play like they did for Katrina.. that really spurred new construction and rebuilding.. Texas is already tough with contractors since no license is required for GC.. I can only imagine the amount of carpet baggers who will flock in for this. I would not want to be in the fix and flip business there right now.. I would think most GC s will gravitate to insurance work then work backwards.. and us fix and flip guys who need best pricing possible will be last on their list.
That no license rule is a thorn in my side too. When they had the TRCC I signed up, got my license and was glad the playing field would start to get equal. Some others signed up across the state too. All three of us lol. they had to shut it down after a few years because of lack of interest.
The only storm trooping I've done was blue tarp in NOLA and West Palm beach. I was a certified contractor for FEMA and the Army Corp. The things I have seen done by the fly by nighters would make most people's head spin. I know you have seen plenty too so no need to elaborate. Good thing about me is that I can flip my own stuff myself and not have to rely on those guys.
- 9yMike ReynoldsPro Memberconstruction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
Originally posted by @Account Closed:
Originally posted by @Mike Reynolds:
When Ike hit the Bolivar peninsula it was devasting. Properties went on the market and stayed there for a couple of years. Prices dropped off course. Then everything was back almost normal but the new houses were better built and higher priced
I don't think Houston will do that. I believe they will instead go the other direction. They will get swamped with contractors and as the business opens back up they will have to hire someone. I once read that 75% of goods from overseas comes from Houston/Galveston ports. That's a lot of stuff that needs to be sent out.
Now Corpus area may be a bit slower like NOLA area. But not Houston.
I've read that about 1/3 of New Orleans remains empty. Most of those folks went to Houston. Now, 12 years later on, to the week, Harvey hits. Will that mass of people return to New Orleans or will they flock to Dallas and Austin?
Funny you should mention that. Louisiana Governor has offered to take in homeless Texans today.
I think it depends on the person. If they are a trade they may go to a smaller town since we seem to have a state wide building boom. If they are professional probably Dallas FT. Worth. More into Tech maybe Austin. I feel there will be a distribution of some kind but since its from Houston it would be hard to say. There will be people that will go back to Houston though. That I will just about guarantee.
- Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes9yI disagree completely that Houston will experience anything close to the population decline New Orleans saw after Katrina. Remember New Orleans had a mandatory evacuation with a large number of residents coming to Houston who just decided it wasn't worth the effort to go back. Even if Harvey displaces tens of thousands of people, there are 5+ million people in the Houston area and most of the displaced people haven't left town. Moving away from Houston is a much bigger step than just staying where you've already been evacuated. Keep in mind as well that the news will focus on the trouble areas. I have 5 properties in the west to northwest area of Houston and not a single one got water in them. I also manage properties spread from the east side of Cypress down to the energy corridor and none of those properties flooded either.
Originally posted by @Kevin Wiley:
I recently asked a similar question and did a little research on Katrina to compare.
The population of New Orleans fell from 484,674 before Katrina (April 2000) to an estimated 230,172 after Katrina (July 2006) — a decrease of 254,502 people and a loss of over half of the city’s population.(1) By July of 2015, the population was back up to 386,617 — 80% of what it was in 2000.
So apparently once a large disaster hits an area, its safe to assume 2 things: 1, people leave en mass. 2, it takes them a long time to come back.
I'm not sure the Houston area will ever be what it once was. Maybe this will make the DFW market explode even further. These people will probably be renting apartment for a couple of years while they get their lives back on track, so maybe its a good time to buy multi-family homes in neighboring cities.
I also assume people will leave the state entirely for fear of hurricanes and possibly move further north. Just speculation, but there were hundreds of thousands of people who flocked to Houston in the last several years and now many of them will be leaving.
I am sure some people have left and wont return, and it will take some time to get back to normal
. But there are a couple of major differences between New Orleans and Houston. NOLA's main industry was tourism and the hospitality industry that created.
Houston's main industry is oil and Gas, shipping,. Those refineries, and oil service workers will return. There is real money in Houston, and those refineries and shipping lanes aren't going anywhere.
Yes I know there is oil and Gas in NOLA, but its just not the same as Houston.
I think you will have a higher percentage of people return to Houston than you did NOLA.
Originally posted by @Kevin Kite:
I remember hearing that insurance companies would not cover Houston because it is a flood zone. However I also heard that because of this that the government subsidizes the insurance coverage. I am not sure how true this is though.
On the news I have seen reports of contractors trying to overprice their work due to the demand. This is upsetting a lot of people and these contractors are being confronted when home owners report them.
most houses do not have flood coverage, and mold damage is severely capped if not excluded.
- Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes9y
This was really the worst possible sort of storm as far as insured losses. With a hurricane you often have damage from wind. Ordinary homeowners insurance covers that, as well as damage caused when rain gets into the house from the wind damage. This was torrential rain. That's rising water and homeowners won't cover anything for that. Only flood insurance. I speak from painful and expensive experience.
We lived in that area in the 80's and early 90's, most of it in Rosenberg. We still have family and friends there and I've been watching this unfold. Rosenberg has been hard hit. We left in 1995 and visited the area in 2012. I was stunned by the amount of development between Richmond/Rosenberg and Sugarland, in those low-lying areas along the Brazos River. In looking at Ft. Bend County's mandatory evacuation areas I notice many areas are marked as LIDs. That was a new term to me - Levee Improvement District. So, they apparently built levees around all this new development. Even an old development - Pecan Grove (we always drove around there at Christmas looking at lights) - had a levee, which I hadn't realized at the time. I just looked at FEMA maps, and these areas are zone X - low risk. Which translates into lenders not requiring flood insurance. Given the high price and poor coverage, I'd guess few homeowners bought it if it was not required. But many of these areas are under mandatory evacuation orders and the Brazos is predicted to crest tomorrow, over the levees. I've seen estimates that 30% of Harris county is underwater. Some of these people are going to be wiped out. With no insurance coverage they're just not going to be able to repair their houses. Even those with flood insurance are going to discover the won't be made whole, like they would have (or close to it) from a homeowners claim.
So, I think a lot of houses will end up just bring abandoned. Or, if not abandoned, left to set long enough, damp and full of mud, that they will have little value. If people stay, there will be a crunch. If people leave, perhaps less so. If the oil industry was booming, I'd lean toward a lot of people staying. But its somewhat soft these days.
- Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes9y
Hasn't there already been a disaster declaration? If so, that may provide some money even to people without flood insurance.
- Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes9y
@Jay Hinrichs We have been having a major shortage of construction workers of ALL types in all of Texas so the carpet baggers will have to come from out of state.
- Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes9y
@Jon Holdman It is expected that the SBA will be providing low interest loans to people via FEMA.
- Real Estate Agent · Houma, LA · Member since 2016 · 240 posts · 115 votes9y
@Bart H. By the time New Orleans experienced Katrina, the majority of the oil industry had already relocated to Houston. Pretty much all of the others who hadn't, with the exception of Royal Dutch Shell, immediately moved to Houston or established offices north of Lake Ponchatrain. Even Shell reduced their personnel footprint in New Orleans. So there wasn't a whole lot of existing business besides the tourism to continue. AND, as others have stated, a lot of people just settled where they evacuated to.
Houston has multiple oil industry businesses that are headquartered there, along with lots of other types of businesses. I don't see it turning into a Post-Katrina New Orleans.
The other thing to point out is that a lot of the people involved in all of these anchor businesses live in Katy, The Woodlands, etc. all on the outskirts...While there has been flooding all around, a lot of neighborhoods on the outskirts seem to have been spared the worst of it.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Account Closed I think you will see a flood of storm chasers come into Houston.. so folks will have to be very diligent not to get taken advantage of.
I saw that with Katrina.. a lot of the contractors I was doing business with in Jackson MS at the time.. ran down to the coast to work for a few months picking up that big insurance pay days..
- Rental Property Investor · Park City, UT · Member since 2016 · 678 posts · 531 votes9y
Just a perspective from "ground zero". I live in Katy and have 8 homes between here and Cypress (NW Houston). Thankfully, none of my properties flooded (although that doesn't mean there wasn't any damage). I started my day yesterday awoken by Blackhawk choppers and a convoy of border patrol trucks and boats in front of my house....then by walking to the main road outside my neighborhood to see where they were off to. They were pulling people out of homes on kayaks, air boats, and Army vehicles. It was surreal and no exaggeration from what you saw on TV.
Later in the day, I went to visit my properties (all but 2). I was surprised to see how many roads open and passable. Some of my properties were in areas told to evacuate due to the Addicks reservoir releases. I thought they would be under water (thankfully not). But what I was most proud of was seeing so many people out....stores and restaurants opening (my favorite sushi place was already back up)...and just the return of life and "back to business" attitude that makes Houston such a great city.
I already experienced contractors trying to jack up prices...some legit as I know getting materials is more expensive. But some pricing I got was just ridiculous. It's going to be tough dealing with high prices, raising insurance rates, and tenants who may have a hard time making ends meet. But there is no doubt in my mind that Houston will rebound. What doesn't kill you makes you stronger! Proud to be a HoUStonian.
@Tony Castronovo Same thing struck me this morning. I live in the Medical Centre area and had the water touching the bottom of my door. Many of my neighbours flooded! Today I have been driving around (still can't get on 288 (But have been surprised and almost surreal that people are just back at it!) Took a quick drive to Meyerland - the gym I use was destroyed (24 hour fitness) but people in the area are stripping their floors out and a number I have spoken to are hurt...but still in good spirits. Houston will rebound, and from the evidence, I have seen today - quicker than most would expect.
- Investor · Katy, TX · Member since 2016 · 24 posts · 18 votes9y
Rude awakening about what the term Watershed really means fortunately my personal home and three rental properties between Katy and Rosenberg were not in any of these locations and did not take on any water although there was a little roof damage. Really makes you think twice about where to make investment purchases in the future.
- Investor · Houston, TX · Member since 2017 · 11 posts · 2 votes9y
Glad your properties came out just fine -- especially the ones in Addicks. I am glad I haven't bought any rentals yet. I was looking into a certain neighborhood in SE Houston and now that whole neighborhood is underwater. Imagine if there were investors that bought several houses in 1 neighborhood; all their investments would've been washed away.
Houston's economy compared to New Orleans is much different. People will stay and it's population will continue to grow. The TMC is the largest medical center in the world and will always be an anchor for jobs. Houston will not have the same outcome as New Orleans.
- Investor · Madisonville, LA · Member since 2016 · 18 posts · 8 votes9yHaving lived in a suburb of New Orleans during Katrina, I'm fairly knowledgeable about the subject. It's true many areas still have blighted houses or empty lots. The majority of these properties were the poor parts of town. Many of the residents lived on subsidized income and didn't have insurance. Those are the type of residents that simply left the city or moved to another part of the state. The middle class and wealthy areas rebounded rather quickly. I know many people that built a huge portfolio of rentals and flips after Katrina. I was fortunate enough to benefit as well. The coastal areas have struggled to come back and I believe that is due to the flood insurance cost. I had to pass on a really great duplex in a rapidly growing area north of. Ew Orleans because the flood insurance was $2400/yr with potential for continued increases with the ever-changing flood maps. I believe Houston will see similar. The poorer areas will struggle, while the middle/upper class areas will be just fine.
- Rental Property Investor · Park City, UT · Member since 2016 · 678 posts · 531 votes9y
Agree @Kevin Nguyen. You bring up a good point about "diversification". I have always tried to get my properties as close as possible for efficiencies of self-management. I may need to change my thinking a bit.
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