Irma was the most powerful hurricane to make landfall in Florida since Wilma in 2005. As it paved a destructive path toward Florida, it seemed certain that its impact would be catastrophic for home builders across the state. Thankfully, that’s not what happened.
David Cobb, Metrostudy regional director of the Naples-Ft. Myers and South Florida markets, says most homes in his area that were built after 2002 fared the storm well, thanks to their impact-resistant glass and hurricane shutters. Cobb credits this resilience to the state’s building codes, which were revamped after Hurricane Andrew in 1992 destroyed more than 125,000 homes and caused roughly $16 billion in insured damages.
“If you drive around the older neighborhoods and see homes built in the ’60s, ’70s, and ’80s, those were the homes that suffered some damage,” Cobb says. “However, we’ve seen several hurricanes hit since the building codes changed, and new construction has performed very well … [the same applies to] new builder inventory—nothing really happened to it because it’s been built to a stronger code.”
In the short term, Cobb expects that the cost of roofing supplies and aluminum (used for pool cages, fascia, soffits, and eaves) will rise, and the already tight labor market will be even tighter, but for a manageable amount of time. Hurricane Irma “was a two-week inconvenience with some damage, but not major damages,” Cobb says.
Builders active in the market, including Lennar, GL Homes, and 13th Floor Homes, anticipate that sales will soften in the last quarter of the year but will bounce back by early 2018. Lennar estimates that approximately 700 deliveries will be delayed in the fourth quarter due to the impact of Irma. “The expected shift of deliveries this year not only takes into account damage from the storm, but also short-term labor challenges, power outages, potential delays in new-home utility connections, and building department inspection and permitting delays,” says Stuart Miller, Lennar CEO.
Michael Neal, a senior economist at the NAHB, also expects a hurricane-related “hiccup” in the pace of new-home starts and permits in the fourth quarter. “In terms of the flow of housing production following a hurricane, we usually see a very short impact that bends the curve downward from overlying trends,” Neal says. “However, very quickly we’ll probably see a return to economic standards.”
Some industry watchers predict that Irma could spur increased demand for new homes. Homeowners living in older houses who are worried about facing another storm may be enticed to upgrade to a new, hurricane-resistant home, they say. But new-home prices in Florida markets like Naples-Ft. Myers and South Florida are already high, and Cobb thinks it’s much more likely that people in older homes will opt to repair or renovate rather than purchase a new home. Either way, he predicts that Florida markets will return to normal in 2018.
“By [snowbird season], everything will be cleaned up and back to normal,” Cobb says. “People’s memories are kind of short in regard to these storms.”
A question that won’t be resolved so quickly is the role that storm-stricken Puerto Rico may play in Florida’s housing market. The island nation received a glancing blow from Irma and a direct hit from Hurricane Maria two weeks later, leaving millions without power for weeks afterward. Some media outlets report that the challenging conditions in Puerto Rico could lead residents to migrate to the mainland instead of rebuilding their homes.
If this happens, Florida’s housing market could be particularly impacted, as it is home to the country’s second-largest concentration of Puerto Rican households (after New York). The Washington Post recently estimated that in the near future, tens of thousands of Puerto Ricans may choose to move to the U.S. mainland, with as many as 1 million or more migrating over the next several years.
While industry experts are still unsure about this scenario, one thing is certain: If Puerto Rico residents do flock to Florida, there will be a need for more housing stock, whether it be multifamily, resale/new homes, or affordable developments.
