Mortgage veteran says "it will take years" for market to recover in worst hit areas
The devastating hurricane that struck Florida last week and resulted in the deaths of more than 100 people will also cause long-term chaos in the housing market, according to Melissa Cohn (pictured), regional vice president at William Raveis Mortgage.
At least 110 people were killed after ‘Ian’, a category four storm, struck the peninsula, making it one of the deadliest hurricanes in living memory.
The hurricane also caused widespread destruction to residential, commercial and industrial buildings and infrastructure, amounting to tens of billions of dollars.
According to reports, the storm could cost private US insurers more than $63 billion in claims, while the likely cost to homeowners in repairs and reconstruction could reach $260 billion, leading to “the largest storm-related losses in Florida’s history”.
Meanwhile, many banks have suspended home loans in the state and other parts of the Southeast.
Read more: How many US homes are in danger from hurricanes?
Cohn (pictured), who is also responsible for mortgage originations in the State of Florida, told Mortgage Professional America (MPA) that it will take years for the market to recover in the worst hit areas.
She said: “The level of destruction where the hurricane hit hardest is unfathomable. People who went to find an address found that the house wasn’t there - it was 300 yards or a quarter of a mile away.
“I’ve been in the business for 40 years and I’ve been through other hurricanes and other major storms. The general view is that real estate values will drop post the hurricane.”
Still reeling from the effects of the catastrophe, Cohn said insurers and mortgage firms were now fully involved in assessing damages, pointing out that Fort Myers in Lee County, where most of the deaths occurred, had been “decimated”.
Asked how long it would take for Florida as a whole to recover, she said the less badly hit areas would “hopefully see a better life again” within a year.
“People are slowly getting back to doing business in Florida, while we’re also trying to help our friends and neighbors to rebuild. If we act together as a community, we’ll get back there faster than we could have imagined.”
She said the market would stabilize as people who have lost homes will need to be rehoused. Florida was also an area with low inventory, which would prevent a major crash in the housing market.
Environmental groups
The catastrophe has also raised questions about the wisdom of building (largely) wooden homes in a state known for having extreme weather events in addition to being threatened by rising sea levels.
According to environmental groups, real estate developers have contributed to the catastrophe by adopting ‘dredge-and-fill’ techniques, involving the destruction of mangroves and the drainage of swamps, which protect coastal areas from flooding.
One such group, Grist, said that allowing the construction of tens of thousands of homes “right in the water’s path” had exposed thousands of homes to storm surges.
Read more: Time for the mortgage industry to face up to climate change?
The financial repercussions of extreme weather events have also come under scrutiny. A report released last year by proptech firm SitusAMC, titled ‘Weathering the Storm: Burgeoning Insurance Costs for Real Estate’, concluded that people living in areas at high risk from natural disasters – including South Florida - were mostly unaware of rising home insurance costs, warning that there was a “substantial disconnect between insurers and real estate market participants about the magnitude” of insurance premium increases.
In 2020 alone, Florida suffered 1,270 natural disaster incidents, the report noted.
The Mortgage Bankers Association (MBA) has also waded in and last year it issued a report stressing the need for the housing industry to tackle the expected costs of future climate events.
The report based its findings on measurements taken over the last 150 years, concluding that there was “convincing scientific evidence” that global warming was contributing to sea-level rise and a greater number of storm surges.
Cohn said she recognized the extent of the problem, saying the mortgage industry “needs to be aware of the quality of the construction that’s done in an area that’s vulnerable to weather issues”.
She said: “Wooden structures are probably not a great idea on a barrier island (Sanibel Island). Florida changes its building requirements once in a while and we’ll change them again now. Homes that were built with the new standards obviously fared much better.”
