How will Hurricane Irma affect the Florida Real Estate Market?

How will Hurricane Irma affect the Florida Real Estate Market?

Sergey TkachevPro Member
Investor, Agent, CPA · West Sacramento, CA · Member since 2009 · 690 posts · 262 votes

On 9/5 we went into contract on an SFR in Holiday, FL (Colonial Hills subdivision), right before Hurricane Irma. This is the northern part of the Tampa Bay area, which did not see as much damage as the areas more south. Our inspection period expires on 9/15, inspection is scheduled for tomorrow, 9/13 - we don't expect any significant surprises based on a preliminary visual check.

The plan was to purchase, rehab/update (requires about $5k-$10k) and have it ready to resell by around winter/spring 2018 or earlier, in time for when the "snow birds" from the northern states are vacationing and looking for property to purchase.  Historically, this is the time of year when demand is slightly higher for homes in that area.

Purchase price is at $94k and ARV in early 2018 is expected to be $140k-160k. At least that was the analysis last week before Irma hit. The neighborhood is desirable for the area, new homes planned to be built a couple streets over, high elevation, no flooding and underground electrical (electricity is fine after the storm).

Here is what I'm wondering about - what kind of an effect will Irma have on the RE market in that area, as well as Florida in general (1) in the short term, meaning today to 1-2 months out AND (2) longer term over the next 6+ months?  I'm wondering if the homes that survived the hurricane become more desirable in these situations or if values come down on all RE regardless?

Would be great to have anyone local from Tampa, Clearwater, Newport Richey and other local areas chime - I know the area is still in emergency modes.

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
9y

@Sergey Tkachev, I've been hesitating replying cause I'm dealing with a major case of survivor's guilt.  The first to be manditorily evacuated and we came home to power, water, AC and a nice green lawn.  I know many are not that fortunate.  But you'd also be amazed at how hardy folks are here. 

Fundamentals will always paint the picture.  What are wages doing in comparison to rents.  What about general population growth.  Like @Account Closed  is absolutely right to  worry about rehab construction costs.  We have those hurricanes of 04 to thank for that wonderful fiasco of the "Chinese drywall".

Companies, and subsequently people do not change course on a dime.  Investors can also afford a bit of patience to see how things unfold.

Meanwhile I've got to go deal with my biggest problem - the lime tree dropped all its limes so I have to pick them up off the ground before putting them in the margaritas.

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  • Rental Property Investor · Clearwater, FL · Member since 2013 · 151 posts · 41 votes
    9y

    Most of us do not have power and internet, so do not expect answers yet.

  • Sergey TkachevPro Member
    OP
    Investor, Agent, CPA · West Sacramento, CA · Member since 2009 · 690 posts · 262 votes
    9y

    @Stephan K., thank you for response!  Yeah, my worry when posting the question was also that it's not taken as insensitive to the situation, given how many people Irma has impacted, I hope it doesn't come across that way.  Thank you for the response, I really appreciate it - I hope everything returns to normal soon.

  • Lender · Stuart, FL · Member since 2017 · 112 posts · 37 votes
    9y

    From what we saw in 04 on the treasure coast after 2 direct hits. It created a fresh awareness of hurricane protection. Such as the desire to have impact windows, hip roofs, better drainage, the age of the roof ect. Also the lack or higher risk factors will be noticed more and you will loose some buyers with higher wind risk. We also saw a avoidance of wood frame homes due to the fear of them being weaker in storms, accurate or not fear is a strong factor.

    We also saw a boost to the market as a whole with the increase in spending and increase in work from insurance claims. However some of that could be tied to other trends during that time.

    BTW east coast is expected to have full power by the weekend according to FPL. 

  • Investor · Salt Lake City, UT · Member since 2016 · 19 posts · 18 votes
    9y

    Thanks Bill for your comments.  I am also under contract on a property in St Pete.  I was able to get my due diligence deadline extended to the 22nd, but my concern is about the availability of contractors and supplies.  I would expect they are all more interested in making alot of money working for insurance companies then giving my a competitive price for a flip.  Any thoughts?

  • Sergey TkachevPro Member
    OP
    Investor, Agent, CPA · West Sacramento, CA · Member since 2009 · 690 posts · 262 votes
    9y

    @Account Closed, I might also try to extend the due diligence period, we'll see how the inspection goes today.  You bring up a good question regarding the effect on construction costs, I can foresee them going up, although I'm curious what happened historically after hurricanes in the past.

  • Lender · Stuart, FL · Member since 2017 · 112 posts · 37 votes
    9y

    It is very likely that materials and labor will go up. It did before as there was more work than labor. Also the time frames of permits and work being completed increased. There may even be shortages of things like shingles adding to cost and time.

  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    9y

    @Sergey Tkachev, I've been hesitating replying cause I'm dealing with a major case of survivor's guilt.  The first to be manditorily evacuated and we came home to power, water, AC and a nice green lawn.  I know many are not that fortunate.  But you'd also be amazed at how hardy folks are here. 

    Fundamentals will always paint the picture.  What are wages doing in comparison to rents.  What about general population growth.  Like @Account Closed  is absolutely right to  worry about rehab construction costs.  We have those hurricanes of 04 to thank for that wonderful fiasco of the "Chinese drywall".

    Companies, and subsequently people do not change course on a dime.  Investors can also afford a bit of patience to see how things unfold.

    Meanwhile I've got to go deal with my biggest problem - the lime tree dropped all its limes so I have to pick them up off the ground before putting them in the margaritas.

    The 1031 Investor5137 Reviews
  • Investor · Salt Lake City, UT · Member since 2016 · 19 posts · 18 votes
    9y

    Tragic...for the lime tree.  Glad it came out ok, Dave. Wishing the best for all of Florida

  • Sergey TkachevPro Member
    OP
    Investor, Agent, CPA · West Sacramento, CA · Member since 2009 · 690 posts · 262 votes
    9y

    @Dave Foster, thanks for the reply!  your situation indeed seems fortunate but don't let the survivor's guilt get to you, I think your fortunate situation empowers you to be of help to those who are less fortunate.  And I believe you about how hardy folks are over there, I have family in Holiday, they are also fortunate and doing their best to help out those who waiting for their life to get back to normal.  My family is also looking forward to visiting in a week.

    and thanks for the insight, it does indeed seem like the fundamentals will remain solid.  And I didn't connect the Chinese drywall fiasco to the 04 hurricanes, makes much more sense now - I wonder if anything similar may be looming this time around or if lessons of the past have been learned?

    Continuing to pray for Florida, hopefully the recovery is as smooth as possible

  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    9y

    @Sergey Tkachev, couldn't agree more.  Our house looks like a spaghetti monster with cords going to different neighbors.  We are Ice central.  Today there's a neighborhood Mario Kart tournament going on.  And last night 25 neighbors came over for a "dead fridge" potluck.  It was awesome!

    All of which does kind of bear out the observation to not listen to the weather channel or think that a little catastrophe will put a damper on things.  People want to live in FL. A hurricane is just an excuse to skip work and school and throw a  party.  Keep your eyes on the fundamentals.

    "Those who don't learn from the past are destined to repeat it."  Society as a whole seems to have a tough time learning.  But individuals certainly can.

    The 1031 Investor5137 Reviews
  • Sergey TkachevPro Member
    OP
    Investor, Agent, CPA · West Sacramento, CA · Member since 2009 · 690 posts · 262 votes
    9y

    @Dave Foster, that is awesome that you guys are making the best of the situation.  Looks like these kind of events really do bring people together and are a good reminder to us about what really matters in life - its really easy to forget these important life truths when everything is going well, sometimes too well :)

    This might be an insensitive question again due to the recent hurricane, but are there any local meetups that you would recommend that might happen between the 21st-28th of Sept?  I'll be in town and would enjoy networking with some local BPers

  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    9y

    @Sergey Tkachev  I just sent you a pm so we could connect out of forum.

    The 1031 Investor5137 Reviews
  • Investor · Orlando, FL · Member since 2016 · 355 posts · 380 votes
    9y

    This hurricane is going to cause investors to look harder at their environmental risk in Florida and put their money in the Orlando Metro Area where it should have been to start with! Orlando is a towering beacon of light for investors at more than 100 ft above sea level. If you're going to park your money in Florida, put it far away from the prying eyes of hurricanes in the bustling and booming Orlando Metro Area! Have to agree with @Account Closed: other than a few downed trees, broken fences, and missing shingles, it's business as usual in Central Florida!

  • Vero Beach, FL · Member since 2017 · 2 posts · 5 votes
    9y

    I was a City Planner in the late 1990's for a municipality in Central Florida, and a Land Planner / Consultant for developers in the first decade of the 2000's.  I'm not trying to be a "downer" but... all these optimistic predictions from people who financially benefit from optimistic conditions in the market are a bit misleading.  Their opinion is bias for sure, but mine is not... I am retired.  As the baby boomers in northern states retire, many are considering a move to Florida. For the past two weeks they have just been exposed to an infomercial (with pictures) of "Why we should not move to Florida."  Sorry, but I am just being realistic....impression and emotion is everything.  This storm will deter people from buying homes in the State of Florida starting right now.  Although the market will eventually rebound (short term memories!!) anyone who says this will not have an immediate effect on the real estate market is either lying...or naive.  

  • Investor · Tromsø, Norway (Europe) · Member since 2015 · 431 posts · 194 votes
    9y

    Just gonna jump in here to get notified on this discussion. Very interesting stuff.

  • Sergey TkachevPro Member
    OP
    Investor, Agent, CPA · West Sacramento, CA · Member since 2009 · 690 posts · 262 votes
    9y

    @Dave Foster - replied to your pm, thanks!

    @Account Closed - thanks for providing a different point of view, you make a good point there.  That's why I'm curious about this question and it will indeed be interesting to see how the market will react.

  • Titusville, FL · Member since 2016 · 55 posts · 40 votes
    9y
    impact rated windows and NG/LP whole house standby generators with ATS are the new swimming pools. Nothing says "shut up and take my money" like not having to put up hurricane shutters and having UPS power (read: air conditioning).
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    9y

    @Joseph Reynolds, You make a good point about caution in too much rah rah in central Florida.  Actually Orlando got hurt worse in Charley than Fort Myers and I have colleagues in Orlando are still without power now (but they do have phone service so I can mock them).

    But there's two other fundamental dynamics that might bear some consideration.  First, folks do love to come here for the weather (most of the time).  The desirability of that will not decrease.  And my personal opinion is that the central part of the state will remain more attractive even though our hurricanes do still pass through because when those suckers hit the central spine they act more like regular bad weather in the North.   Call it a hurricane if you will, but these things act more like bad thunderstorms and tornados which is a known commodity for them.  So I don't see them detracting from the Orlando market.  In fact, I'm still quite bullish on it. 

    The second and more nuanced dynamic is that the 04 season followed by an equally nasty 05 spelled the peak and end of the real estate boom in Florida.  I was misled into thinking that it was weather jitters when really even in 05 we were starting to see the first ripples of the sub prime mortgage debacle.  DOM increased dramatically, the downward spiral of prices began, etc etc.

    The point being here that the weather here or in Houston will have much less impact than true market demographics and fundamentals.  If you don't like the weather just wait for an hour.  It will change.

    The 1031 Investor5137 Reviews
  • Member since 2016 · 13k+ posts · 12k+ votes
    9y

    As a outsider I see certain situations arising. First every resident  expects that hurricanes will continue to happen and get worse over time. No surprise that this is going to happen more regularly and get progressively worse. At some point many will tire of the threat and real estate values should drop or remain very low. The bigger issue will be increased insurance costs that will make investing in rentals far less financially attractive. 

    For the immediate future foreclosures will drastically increase as  uninsured or under insured owners of damaged properties walk away. Those could make for good investments but they would best be approached as flips after the recovery is near completion. If they were damaged this time they may be destroyed next time.

    For those interested in long term investments southern and coastal areas should be avoided if for no other reason than insurance costs. After recovery and before the next hurricane may be a good time to sell since the storm threat will only be getting worse over time.

  • Charles SoperPro Member
    Rental Property Investor · Merritt Island, FL · Member since 2015 · 253 posts · 178 votes
    9y

    locally I've seen a number of posts to social media from renters who are having a hard time getting in touch with their landlords and/or getting them to deal with damage that's made the house unsafe or uninhabitable because of a downed tree or other obstruction.  I'm guessing we'll see a number of those that are or have become reluctant landlords get a little more motivated to finally sell that "investment".

  • Sergey TkachevPro Member
    OP
    Investor, Agent, CPA · West Sacramento, CA · Member since 2009 · 690 posts · 262 votes
    9y

    @Thomas S., thanks for chiming in!  I agree that insurance cost is likely to be a bigger factor as far as expense goes, although that has already been the case, at least in the areas of central Florida I'm aware of.  Areas with higher elevation not requiring flood insurance have been in higher demand (all else equal) than those that are more prone to flooding in lower areas.  For example, the house we have in contract is in such a subdivision and the area commands higher values than lower areas just a couple blocks away and this is mostly due to insurance - buyers want to avoid the extra cost and area willing to pay more.  So you make a good point, this has been a factor that affected prices historically.

    @Charles Soper, wow, that's unfortunate, but hopefully the media doesn't decide to focus in on these cases as examples of "investor slumlords" and place all investors under this category as they've done in the past.  You bring up a good point though, it's interesting how landlords are dealing with these kinds of situations in the hardest hit areas.

  • Investor · IN · Member since 2012 · 263 posts · 168 votes
    9y

    Alot of destruction in the keys.... I wonder how Monroe county will allow homes to rebuilt since every lot relies on the Point (ROGO) system. WIll they allow existing destroyed structures to be immediately rebuilt? And, for all the retirees down there, how will this impact them in terms of financially being able to rebuild? Thoughts?

  • Charles SoperPro Member
    Rental Property Investor · Merritt Island, FL · Member since 2015 · 253 posts · 178 votes
    9y

    @Jim C. not sure about monroe County but in Manatee and Sarasota counties if your on the keys you have two choices.  Maintain or repair the existing structure or if you choose to rebuild they require you build on concrete piers and basically make the 1st floor (not sure of minimum elevation for 2nd floor) parking and storage.  Kind of sad because it kills the old character of the area.  Anybody buying up old property out there right now is paying $300k+ for a run down shack that needs to be razed and build a McMansion/vacation rental in its place.

  • Member since 2016 · 13k+ posts · 12k+ votes
    9y

    "I wonder how Monroe county will allow homes to rebuilt"

    This to me is a major issue. Since the government has such huge expenses after a situation such as this and the majority of tax payers end up on the hook for the costs is it appropriate to allow any one to rebuild in a area that will inevitably be devastated over and over again. 

    Additionally since insurance costs are born by all policy holders is it fare to allow any person to qualify for insurance when the likely hood is that their home will be repeatedly damaged or destroyed in the future.

    They should not be allowed to rebuild unless they are informed that doing so will make them ineligible for future government assistance and that they will not be able to get insurance coverage from any company. 

    Financially there are many areas that for the sake of all US taxpayers should not be allowed to rebuild or should never qualify for any form of government emergency assistance state or federal in the future. 

    You take the risk, you pay the price.

  • Vero Beach, FL · Member since 2017 · 2 posts · 5 votes
    9y

    @Sergey Tkachev    That's true, you make some good points.  However, a bubble may be forming today as well..(although not as bad as 2004)  Here on the Treasure Coast we are seeing 1950's concrete block homes that sold under foreclosure for 85,000 seven years ago now being assessed for over 300,000 in some places.  Renters are being squeezed as investors swallow up property.. and home owners raise rents in relation to their skyrocketing property values.  2004 also had an overbuild of condos, mostly funded by investors instead of future homeowners...and many of those condos stayed vacant for years..(look at construction in Miami now)   All worrying signs.  Florida Real Estate is a rollercoaster, I'm just playing devils advocate...throwing caution into the wind.

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