Post Irma Real Estate Cause and Effect: Attention Residents and Investors

Brace yourself!  There is another Cat 5 storm brewing out there that has its eye on Florida/Southwest Florida!  Yes, it's the Post Irmageddon Real Estate Industry Prognosticators!!

It's been interesting to hear the numerous opinions of Post-Irma real estate effects from real estate professionals and local members of the community.  Having been in Southwest Florida for many years and experienced multiple threats, Hurricane Charlie and Wilma and of course now Irma I think I am well versed to render my short opinion, followed by a detailed explanation:

In real estate, you always hear the phrase Location, Location, Location.  Same thing when it comes to post storm.  You need to ask yourself “Is your location good?”  Then of course when you were considering purchasing your house (existing or new construction) you had to consider quality of construction and probably asked yourself, Is this home built of 100% CBS, even the second story?  Is this roof certified for wind mitigation?  Is this foundation elevation certified by FEMA for the LOMR-F? If you answered YES to all of these, then you can feel confident that the effects that Irma had on your property value should go unchanged.  In fact, there is a good chance you will see a bump in value while older built homes that are not certified by FEMA or not built to today's strict, but necessary building code may suffer some setbacks soon and later.  If you answered no, you may be thinking “Darn it, I should have talked to Scott before I bought/built this!”

I haven't spoken to a single realtor who is losing a deal to buyer's choice.  There may be some fallout, however, after insurance assessments and stressed lender guidelines.  And we are seeing some instances where both buyers and lenders are requesting an additional home/roof inspection prior to closing on the deal.

As our readers, friends and clients know, we develop almost exclusively in the Iona McGregor submarket where it’s almost impossible to find a site that is above FEMA's Base Flood Elevation (BFE).  The BFE was most recently changed in 2009 after the hurricane cycle that included Charlie, Wilma, and Katrina.  The BFE is the regulatory requirement for the elevation or floodproofing of structures. The relationship between the BFE and a structure's elevation determines the flood insurance premium.  Homes built below the BFE have a very tough time finding insurance, so they are typically forced to go with Citizens, a government sponsored program that is not cheap.  On many occassions, Citizens flood policies significantly lower the buying power of prospective homeowners.  Newer homes are typically built right at the BFE, almost all of them still requiring flood insurance.  These homes usually have more and cheaper options to choose from, however.

Then there is something about 99% of the locals don't know about and that is the LOMR-F.  This stands for Letter of Map Revision using Fill Dirt.  In short, the LOMR-F is an official revision to the FEMA Special Flood Hazard Area and certifies through FEMA and local public record, that by using fill dirt, you have raised your structures to about one foot ABOVE the current Base Flood Elevation on your property, essentially taking the structures OUT of the flood zone.  As an incentive or result, most lenders do not even require flood insurance if properties are LOMR-F certified by FEMA.

Hurricane Irma ravaged certain areas of Florida, some within a mile in proximity to our developed communities.  We sustained 115 mph wind gusts and coastal flooding especially in low lying areas.  Combine Irma with only three weeks earlier getting beaten with Hurricane Harvey's outer bands bringing over 16 inches of rain in under 3 days to the Iona submarket.  Following each of these events, both Bent Palms on McGregor and Davis Preserve, two of our newest communities sustained zero structural damage and zero flooding.  There was barely a drop of standing water outside of our detention and water management areas.  I'm confident that even if we received an additional 10 inches of rain on top of all of it, we still would have been above water.  It took some neighboring and older communities days to have a walkable parking lot.

Our two-story townhomes were built utilizing concrete from top to bottom.  Our hip-roof system with added strap support smiled at the high wind speeds of Irma.  It is going to be properties built similar to Bent Palms and Davis Preserve that will need to set a new precedent with how buyers and investors look to buy and/or build real estate going forward, even if direct hurricane impacts are few and far between.  You clearly have a choice NOT to build this way, but you are gambling with a major investment that can have fluctuating factors due to tropical systems.

We are nine days following Irma's eye wall hitting the area.  Visit our communities today and see for yourself, you'll find them in the same, if not better condition then prior to the storm.  A day after the storm, I drove through to assess the properties and check on any tenants who I could find, and the tenants who stayed in the area were extremely grateful that despite a power loss, experienced, no flooding issues and no structural damage.  I consider this a credit to the quality of the construction and our decision to invest more money in our assets to provide quality living for our tenants, which ultimately protect our biggest asset.

Florida is not losing our inbound migration momentum.  It’s just not happening.  Every area of the United States is prone to extreme weather.  Hurricanes, tornadoes, wildfires, mudslides, flooding, etc.  Is a hurricane experience the price you pay for living in Paradise?  If you believe the way I do, protect your home, your investments, and most importantly your family.  The local economy in Lee County only experienced a setback, not a catastrophe capable of affecting our tourism.  I believe a small silver lining here is that we will see an influx in construction labor, something that even before Irma, was needed.  The stock market has made people a lot of money this year.  Housing markets remain robust.  Combine those two ingredients, and it's a perfect situation for or inbound migration to continue to move to SW Florida.

So, in closing..  Stay away from low-lying flood prone areas unless you invest a little more in fill dirt and get your LOMR-F FEMA Certification done.  Or, the consequence will be higher flood / wind premiums and lower buying power regarding price related to what your lender underwrites your ability to pay.  Build entirely of CBS construction if you are building new.  If you are an older home and have roof trusses, there are still ways you can have your roof certified for wind-mitigation credits.  Prepare for all of this, and it becomes a major selling appeal to the market when you go to sell.

The local real estate market can sustain a hurricane or two or three.  Barbuda will be rebuilt from being destroyed and people will live there again under what is most likely much stronger building codes.  We already have those building codes.  The more you can mitigate against Mother Nature, the more you can rest easy that the market will respond to your property far more than it will to a property with significant negative vulerabilities.

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