Shared from the 9/10/2017 Houston Chronicle eEdition

REAL ESTATE

High values, dry homes?

Housing sales may recover soon with non-flooded sites at a premium

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Yi-Chin Lee / Houston Chronicle

Real estate agent Aaron Cruz puts a “Never Flooded” sign on the lawn of a Meyerland home. It’s been listed at $579,000.

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The sale of this Meyerland house was supposed to close Sept. 8, but the buyer backed off after the area’s flooding. Real estate broker Kersi Engineer may put the house back on the market in two months.

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Cruz

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Yi-Chin Lee photos / Houston Chronicle

This scene of torn-out drywall and ruined furniture in Meyerland is common in many neighborhoods across the Houston area after Harvey’s flooding.

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REAL estate agent Aaron Cruz’s four-bedroom, three-bathroom listing in Meyerland has been on the market for months amid a surplus of for-sale signs in the area. But after Tropical Storm Harvey flooded more than half the houses in this neighborhood of midcentury homes, Cruz now has one of the few listings that remains dry.

A few days ago he put a “NEVER FLOODED” sign in the yard, hoping it would help the house stand apart. It’s also one of the few in the area without a pile of torn-out drywall and ruined furniture by the curb.

The homeowner, Fabiano Gori, tried to sell last year. He put the house on the market a week before the 2106 Tax Day flood. The property stayed dry then, too, but nobody was interested after the floods, and he took it off the market.

Now, he’s considering turning it into a rental.

“The house is perfect,” Gori said, “but after this flood I think it’s going to be a little harder to sell.”

Cruz and Gori are among many Houstonians pondering a vastly different real estate market in Harvey’s wake. Neighborhoods that recover quickly are likely to attract the lion’s share of buyers, while others are expected to take months or years to rebound.

“The minute water comes across your threshold, you’ve lost about 22 percent of your value.”
Tom Crawford, real estate appraiser

In Houston, the first thing shoppers typically want to know when looking at a house is what school it is zoned to or how close it is to their job. After Harvey, more will ask: “Has it ever flooded?”

Housing analyst Scott Davis said the housing market will be relatively slow over the next 30 days, as listings are withdrawn and contracts fall through. But activity should pick up by the end of the year.

“It will take 60 to 90 days to get insurance checks clearing. Once those start coming in, we’ll see a big jump,” said Davis, senior vice president of Meyers Research.

Homebuilder Will Holder, president of Trendmaker Homes, said there will be some “involuntary demand” initially, as some people forced to relocate will seek to buy homes.

“We sold seven homes last week and four were written after the storm,” Holder said. “People are going to get out and buy a house if they need a house.”

After analyzing home sales activity after the last 10 floods in Houston going back more than two decades, Davis found the market typically recovers quickly.

“In every case, within six months we were generating sales at levels above what we were selling before the flood,” he said. “I was really surprised by the resilience.”

After Tropical Storm Allison in 2001 and last year’s Tax Day flood, he said, builders purchased flooded homes and replaced them with new ones. Many buyers opted for new instead of fixing up properties that flooded.

Tom Crawford, a real estate appraiser based in north Houston, said property values could spike for homes that haven’t flooded. As people scramble to find temporary housing, rents will go up, too.

Crawford, who has worked in the local real estate industry for several decades, recently completed a study based on home values and flooding. He analyzed recent sales in River Plantation, a subdivision in the Conroe area just east of Interstate 45, comparing a small sample of homes that had flooded in the past with similar homes that had not.

“The minute water comes across your threshold,” he said, “you’ve lost about 22 percent of your value.”

Another complication buyers face in a post-Harvey Houston is the availability of flood insurance.

Real estate broker Ed Wolff said concerns about the soon-expiring National Flood Insurance Program could affect home sales in flood-prone areas. If Congress doesn’t authorize a long-term extension, he said, “it’s going to frighten people even more.”

“We need an extension of three or five years in order to provide people with the comfort they need to sell or buy and be able to protect their assets here. If it’s not extended, you can’t get a mortgage here. Lenders won’t loan in a floodplain without flood insurance.”

As homebuilding returns, prices for new homes are expected to inch up as well.

With Houston and other places along the Gulf Coast facing a massive rebuilding effort, labor will tighten and construction costs will rise.

Subcontractor shortages are already widespread, according to a recent survey from the National Association of Homebuilding, which cited a dearth of framing crews, carpenters, bricklayers and other professions.

Cindy Hamann, the Houston Association of Realtors’ 2017 chair, doesn’t expect wild fluctuations in home prices up or down. But inventory for moderately priced properties — already in high demand — will continue to shrink.

“I do believe where we’re going to be hurt is under that $200,000 price range,” she said.

Homebuyers are, of course, going to want homes that didn’t take water.

“But being realistic,” Hamann said, “in Houston there are homes that have flooded several times that hold their value. They’re closer to downtown and restaurants, shopping and entertainment.”

While the market may experience some temporary ups and downs, Holder said, jobs remain key to growth.

“Unless we get jobs, it won’t matter,” he said.

The local realty association launched a tool this past week to allow real estate agents, property owners, landlords and property managers to post properties they are offering for temporary housing in the Houston area, Victoria, Beaumont and everywhere in between that was affected by Harvey.

For Gori, the homeowner in Meyerland, Harvey became yet another obstacle to his efforts to sell his home.

After he couldn’t sell it last year, he lowered the price to $579,000, made some repairs and put it back up for sale in February.

He’s now considering renting it for six months or a year.

“I don’t think the house is going to be sold for the next few months for sure,” he said. nancy.sarnoff@chron.com twitter.com/nsarnoff

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