A lot of people have asked me “is it a good time to buy a Florida home right after a hurricane”?
No. It’s usually a bad and potentially hazardous time for most people to buy a home in Florida right after a hurricane hits the state.
Here’s what you need to know about when to buy, and when to stay away from the Florida real estate market, after a hurricane hits the state.
Why Florida real estate prices often rise right after a hurricane hits the state.
- Home and condo prices in Florida can actually rise after a hurricane because real estate prices are determined by supply and demand. Sure, no one is traveling to Florida to buy homes when a hurricane is coming and people living in the state are ordered to evacuate, so demand temporally falls.
- But, the devastating winds and flooding from hurricanes such as Irma drastically reduce the supply of available housing overnight by damaging a huge number of homes and making them unlivable or unsalable.
- At the same time as this large drop in supply due to damage or flooding, tens of billions of dollars in insurance and government reconstruction money that flows into Florida after a hurricane’s destruction will boost the states economy and increase jobs by bringing in a large army of insurance adjusters, tree trimmers, utility crews, etc. from other states. Why? Because there aren’t enough workers in Florida to handle the massive clean up and reconstruction necessary.
- Before the hurricane menaced the state, the supply of homes for sale in Florida was already low for a long time, causing home prices to rise into bubble territory. Why? Because people are reluctant to sell any asset, including their home, that is continually worth more next month than it is this month.
Why Florida real estate prices can fall dramatically after hurricane clean up and restoration money drys up.
- All those convoys of trucks and workers (who incidentally get well paid while in Florida) spend lots of money while in Florida. This extra spending boosts employment at Florida restaurants, bars, hotels, apartments and more, where these wages are spent.
- Many of the reconstruction workers will buy homes if they can because they may be working in Florida for a year or longer and want to bring their family to the state.
- When all of the hurricane reconstruction funds are spent, most of the out of state workers will return to their home state because they will become unemployed if they stay in Florida. They will also take all that extra spending with them. The additional people who were hired to feed and entertain them, will also become unemployed because the businesses won’t be able to afford to pay them as sales drop.
- Apartments will become vacant and newly unemployed new Florida homeowners likely won’t have the funds to pay their mortgages.
All the reconstruction money and worker wages will all leave Florida right around the same time that all these newly replaced or repaired homes will be ready to be occupied. Unfortunately, many new Floridians will now know that hurricanes can cause you to be ordered from your home because your life may depend upon leaving. Or you can become homeless due to hurricane destruction or flooding. Or live for a week or month without AC in hot humid still summer weather. They’ll learn what happens when millions of people are forced to evacuate with no where to go and no gas to get there. So many of those repaired/replaced homes will go up for sale adding to the supply, as large numbers of people decide where they moved from is better overall than living in Florida.
- Pictures of hurricane damage and flooding in the news for weeks will slow the rush of people moving to Florida. Many who moved to Florida during the record 10 years without hurricane evacuation, disruption, flooding and damage, will leave Florida all around the same time, rather than smaller numbers annually during “normal” hurricane seasons. Crashing demand at the same time of increasing supply of homes for sale or rent will cause Florida real estate prices to sink.
What else should you know about what happens to the Florida real estate market after a hurricane?
1. After the back to back disasters of hurricane Harvey in Texas and Irma in Florida, homeowners and flood insurance rates may skyrocket, making even future highly discounted Florida homes unaffordable, especially for retirees on a fixed income. Florida homeowners already pay the highest home insurance rates in the country
2. As I write this in mid September 2017, there are another 2 potential weather systems that could turn into hurricanes. They appear to be heading Florida’s way. More hurricane damage could boost Florida home prices even higher short term due to additional billions being spent in Florida. However, after a month of day after day news coverage of hurricane Harvey and Irma, more negative news will likely cause even more people to change their mind about moving to Florida.
3. If the supply of homes for sale in Florida increases greatly after Irma’s restoration money dries up, this can cause a “Florida only” recession. If this Florida event coincides with a national economic slow down (we are overdue as they happen every 7 years on average), the real estate market could end up being in worst shape than after the last recession when prices dropped 60% on average from what they were at their previous peak. And still no one bought homes in Florida for years after that meltdown.
4. The area’s that have actually experienced the most damage, and the area around it within commuting distance for reconstruction workers, will experience the highest increases and then the steepest drops.
- Want to be certain if moving to Florida is right for you or your family? You’ll know after reading the Florida Move Guide.