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The Texas Floods of May 2015: How Real Estate is Feeling its Effects

“It was the most horrible and amazing experience of my life.”

Wimberly, Texas resident Christy Degenhart summed up her recent experience surviving the torrential rainfall of May 2015 with these words. In the literal wake of tragedy and devastation, she was equally impressed with the love and support from her community that helped her through the days and weeks that followed the Texas floods. Though her friends and neighbors are helping her rebuild, traveling to her hometown just 2 months ago would not have told you the same story of community and rebirth, but one of devastation, ruin and heartache (NY Times full article).

Texas Floods – Statistics

In one month’s time, enough rain fell to cover the entire state 8 inches deep in water. In all, 37.3 trillion gallons of water fell over the Lone Star State. The flooding resulted in 31 deaths and racked up $45 million in damages in Houston, Texas alone. Texans are looking forward and questioning the lasting effects of the flooding on the real estate market. While initial data isn’t promising, it also suggests the hope of stabilization may not be as far off as you’d expect.

Now that the heat Texas summers are known for has returned, affected homeowners are left pondering the few options before them. Should they repair their flood-ravaged properties and move back in, sell as is, tear down and build anew or move some place else entirely? It’s no secret that homes damaged by flood waters drastically decrease in value. In addition, these homes tend to scare off potential buyers despite slashed home prices. But home and business owners aren’t the only ones affected. Mass flooding can cause a ripple effect by home values dropping, then homebuying decreasing, thus halting home building.

As a further complication, surrounding areas not as dramatically affected see a spike in homebuying as displaced residents seek new homes. The storm-ravaged area’s market suddenly dies while the surrounding area becomes fiercely competitive as the market gets tighter. In these outlying cities, prices could escalate up to 20% above value due to scarce inventory.

Impact of Disasters on other Real Estate Markets

In 2013, the Boulder, Colorado area was likewise affected by flooding. Realtor Steve Altermatt conducted research to get a better understanding of what the housing landscape would probably look like post-flooding. He examined the number of homes sold, their average and median sale prices, as well as end-of-quarter inventory for fellow housing markets affected by disasters including flooding, earthquakes, the 9/11 disaster, and hurricanes. The research tracked housing data in 10 areas for the quarter before each disaster, the quarter of the disaster, and the following four quarters that followed.

As to be expected, the quarter of the disaster resulted in inventory quickly dropped as the precentage of home listings rose. However, Altermatt’s findings for the following 4 quarters yielded surprising results.

  • 89% experienced an increase in home sales one year after the disaster.
  • The average number of homes sold increased by 22% the year following the disaster.
  • 90% of the markets studied experienced higher than average appreciation the year after the disaster.
  • Best of all, median home prices in disaster areas rose by 15%.

So what does this mean for the Texas real-estate market? The year ahead promises to be a challenging one as lives and homes are rebuilt. The summer of 2016, however, holds new promise. Texans have long been taught that tough times don’t last, but tough people do. Sam Houston couldn’t have said it any better: “Texas has yet to learn submission to any oppression, come from what source it may.”

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