Storm surges and water damage are likely to strain the housing market in the Carolinas in the aftermath of Hurricane Florence, according to a blog written by Mark Fleming, Chief Economist for First American. Though the latest housing starts survey shows that residential construction jobs increased by 6.5 percent, Fleming wrote that construction companies still cannot keep up with the number of permits, and storm damage was likely to drag them down more.
“Based on the National Hurricane Center storm surge estimate, we expect that more than $13 billion worth of homes, based on estimates of current market value, are likely to be flooded with at least a foot of water,” said Fleming. “Approximately 80 percent of these homes are expected to be in North Carolina. In total, nearly 50,000 residential housing units may be damaged. Due to the impacts of Hurricane Florence, we expect to see a dip in the number of permits, starts, and completions in the next few months, particularly in the South.”
“But hurricanes are not only detrimental to existing homes; they have significant impacts on the labor force,” Fleming added. “Research has found that average labor costs increased 10 percent following Hurricane Katrina in the three metro areas surrounding New Orleans 1.5 years after the storm. As recovery efforts ramp up, the existing shortage of construction workers will be felt all the more keenly, likely presenting a challenge to rebuilding efforts and further limiting the pace of new home construction”
A recent analysis by CoreLogic estimated that the wind and storm surge from Hurricane Florence could result between $3 billion and $5 billion in losses for the housing market.
Kroll Bond Rating Agency also estimated the potential impact of Hurricane Florence on Residential Mortgage Backed Securities (RMBS) and default rates. According to KBRA, the Carolinas include 4.18 percent of the collateral backing the agency's rated RMBS 2.0 portfolio. Additionally, KBRA noted that the potential impact to coastal areas only includes 0.76 percent of the collateral from properties backing its rated RMBS portfolio. The report also included overall collateral concentrations by county in the Carolinas. The Core-Based Statistical Areas (CBSAs) covering Charleston, Myrtle Beach-Conway and Wilmington represent 0.34 percent, 0.19 percent, and 0.12 percent respectively of total pool balance within the agency's rated RMBS portfolio.
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