Damage from Florence Estimated at $22B
Though Hurricane Florence has worked its way through the Carolinas, an estimated $22 billion in damage still remains. According to reports, flooding insurance will only cover a fraction of the damage, and those forced to evacuate North Carolina could now be facing a housing shortage.
The estimated cost of damaged property—currently ranging from $17 billion to $22 billion—could end up being conservative, according to Moody’s Analytics.. Mark Zandi, chief economist at Moody’s, noted that the Carolinas were close to “$10 [billion] to $15 billion on Friday,” given that flooding was more extensive than originally forecast.
Hurricane Florence’s path blew through some of North Carolina’s smaller cities, where much of the rental housing stock is owned by small landlords https://t.co/NkwwC1Cutn— The Wall Street Journal (@WSJ) September 18, 2018
The estimate could be revised as more information comes to light and flooding may continue to be an issue in some areas. According to the analytics firm, Florence is among the 10 costliest hurricanes to date, though it is projected to only have a slight impact on the U.S. economy overall.
"These estimates are based on the information available, and there is a high probability that Florence's costs will be revised significantly higher with added information or inland flooding," the firm noted. Zandi added that damage to businesses could have been worse if the storm moved closer to the port of Charleston, South Carolina, or Norfolk, Virginia.
Though the damage caused by previous storms in other cities has made it difficult for evacuees to find housing, the struggle is worse for evacuees from Hurricane Florence. The difference? This storm moved through some of the state’s smaller cities—places like Wilmington and Fayetteville, which have fewer than 1,500 empty apartments each. In cities like these, the type of rental housing tends to be single-family homes, a kind of residence that is more vulnerable to storm damage in comaprison to higher-rise apartments.
The housing market following hurricanes tends to be bad news for those who own their homes or are looking to buy, as sales slow down and borrowers fall behind on their mortgages. But for landlords whose properties survive largely unscathed, the storm can yield unexpected positives: The apartment vacancy rate is likely to be lowered by evacuees moving in.
John Pawlowski, an analyst at Green Street Advisors, told The Wall Street Journal that in avoiding major urban centers, Florence also spared the properties of institutional apartment and single-family rental landlords.
Even with this in mind, the increase in the number of hurricanes and storms, resulting from climate change, is still likely a threat to the bottom line for single-family rental owners. Many rental properties in areas like North Carolina, South Carolina, Florida and Texas are single-family homes.
According to USA Today, roughly 250,000 homes were estimated to be impacted by Florence, and only a small portion are covered by flood insurance. For example, 10 to 20 percent of coastal homeowners in the eastern part of North Carolina are covered through the government’s National Flood Insurance Program. Only 1 to 3 percent of homes located inland have flood policies, according to John Rollins, actuary at consulting firm Milliman. Roughly only 3 percent of homes in North Carolina have flood insurance. Only 8 percent of homeowners in South Carolina are similarly covered.
According to Rollins, these coverage numbers are low because residents think that since their home isn’t in a high-risk area, there’s no risk of a flood. Currently, the estimated insured losses from Florence fall in the $3 billion to $5 billion range, though Goldman Sachs projects they could go as high as $10 billion to $20 billion.
Insured losses are roughly one-third of overall economic losses, which puts homeowners on more of a financial hook for covering rebuilding efforts if losses fall under uncovered flood damage. For a 1,000-square-foot, single-story home furnished with $20,000 of possessions, 1 inch of interior water can cause $11,000 in damages. When the water climbs to 5 inches, damages tend to be above $18,000.
“You are looking at a lot of homeowners that will have out-of-pocket costs that could easily be five figures, or more than $10,000,” said Cathy Seifert, an insurance analyst at CFRA.
As of Tuesday (Sept. 18), 18 North Carolina counties have been designated for assistance, including Bladen, Columbus, Cumberland, Duplin, Harnett, Lenoir, Jones, Robeson, Sampson and Wayne counties. This designation allows the federal government to provide reimbursement to state and local governments for debris removal and other emergency responses.