Natural Disasters: How Can It Affect The Housing Market?
How Natural Disasters Affect The Housing Market
Natural disasters, like a hurricane or a medical pandemic, can have a huge impact on the housing market. It doesn't matter if you're a first-time homebuyer, have been in your home for a while, or even building your own home, everyone gets affected. Natural disasters often impact supply chains and this is why new home construction becomes affected.
Prices will typically rise and construction will come to a standstill until supply chains come back to normal. Home prices in areas not affected by a natural disaster will typically rise as well. Delinquency rates are also subject to rising due to natural disasters which further complicates the housing market. To start, let's look at how supply chains are impacted by things like floods and hurricanes.Supply Chain
Here are a few interesting facts about building materials and the United States.
- 30% of building materials are imported from China
- Another 20% are imported from Canada and Mexico
- COVID was estimated to have caused a 20% drop in supply volume
Building materials like elevator parts, plumbing, and electrical materials mostly come from China. Something like a flood or an earthquake there would have a big impact on the United States getting the supplies it needs. When supply chains get disrupted like this, it can typically cause a rise in domestic supplies, like wood, for example.Home Sales
In areas that were hit hard by a hurricane or a fire, there are some interesting things that happen to home prices. First, house prices where the disaster occurred could plummet by about 40-50%. In neighboring cities, however, house prices could rise by a considerable amount. This effect was observed in Paradise, California after the area was hit by a fire.
This impacts first home buyers a lot because it puts a premium on homes around disaster-struck areas. Pair this with the impact on supply chains and building material prices and this is why you see home prices rise so much. It is unclear if the rise in home prices will fluctuate when building materials fall.Delinquency Rates
The good news here is that delinquency rates have been the lowest they've been in 20 years. This isn't true for areas hit by a natural disaster. After the 2018 California CampFire, delinquency rates were 21% higher in the Chico metro area than the previous year. This same pattern is observed in other areas like Panama City, Florida after it was hit by a hurricane.
When delinquency rates increase like this, it often leads to foreclosures and other negative outcomes. This isn't good as a neighborhood with a lot of foreclosed homes could see their prices take a hit. This could be a positive for the right buyer if home prices in the area stabilize after buying a home.Conclusion
Sometimes people think that construction workers are not doing their best when it comes to building homes. This simply isn't the case in the current home market, especially after a natural disaster. Disasters like a hurricane, COVID-19, or a fire cause supply chains to become severely disrupted. Since the United States imports building materials, this means that disasters that don't even occur here are impactful.
Rising home prices and delinquency rates further complicate things for new home buyers. This is why having a helping hand when you're a new home buyer or looking for a new home is crucial. Hyde Homes has made building a home for new home buyers easy. They focus on getting you into a home that is "move-in ready" for you and your family.
Call Hyde Homes at (256) 639 - 4663 or click here to start the process today!