Editor’s note: After the initial concerns of rescuing people from natural disasters like Hurricane Katrina, the next big question is over the recovery and rebuilding process, which has already begun in Katrina-ravaged areas. In this three-part series, we look back to the rebuilding process after the Oakland Hills fire in Northern California in 1991, Hurricane Andrew in South Florida in 1992, and the terrorist attacks of Sept. 11, 2001, in downtown Manhattan. We examine the damage in each case, what happened to the local real estate markets in the short-term, and what’s happening today. (See Part 1: Oakland Hills Fire transformed character of hillside homes and Part 3: Downtown Manhattan real estate bounced back.)
Hurricane Andrew howled through southern Florida in 1992, leaving 28,000 homes destroyed and some $15 billion in losses – but within two years, the area rebounded strongly, and then spectacularly, industry observers said.
“The area where I lived was devastated by Andrew,” said Keith Tyson, who has been a Realtor in the Miami area for 25 years. “I lost my house, my business and everything that goes with it.”
Hurricane Andrew destroyed about 28,000 homes, according to Jerry Howard, CEO and executive vice president for the National Association of Home Builders. The hurricane caused losses of $15.5 billion in 1992, according to the Insurance Information Institute.
Real estate prices in the area fell precipitously, Tyson said.
“Houses that sold for $100,000 before Andrew were selling for $15,000,” the Prudential Florida WCI Realty agent said. “In the affected area immediately after a disaster, homes are sold not as normal homes but as damaged goods.”
Tyson has lived through many Florida hurricanes. He also works for Miami-Dade Search and Rescue and is currently helping out in New Orleans, and said it takes about a year and a half for things to return to normal after big disasters.
“Most people with a house, as with Hurricane Andrew or here in New Orleans, will probably be out of their house for a year,” Tyson said.
Tyson noted that prices in surrounding areas with no damage or minimal damage quickly “go through the roof” after a disaster, because demand skyrockets.
According to Tyson, after a disaster, things begin to pick up around the four- to six-month mark. The Realtor said it took four months for him to get a check from his insurance company after Andrew destroyed his home.
After the grim initial recovery period following Andrew, Tyson emphasized that there has been a major bounce-back.
“Andrew went through in August 1992,” Tyson said. “By June of 1994, prices had returned to $100,000 for a typical two-bedroom. Now that area is a thriving community and that same $100,000 house is selling for $250,000.”
The area has “completely recovered,” Tyson said.
A fellow Miami Realtor who has lived in Miami for 30 years echoed Tyson’s comments.
“Immediately after the hurricane, there wasn’t any business in the area,” said Dean Isenberg of Turnberry International Realty. “Andrew devastated Miami and Homestead.
“Some people moved north to Broward County (Fla.) and some lived in trailers that FEMA gave them for temporary housing while they rebuilt their homes,” Isenberg said.
Isenberg said the market came back hotter than ever after the area was rebuilt.
“The big bad wolf blew down your old cruddy home and it had to be built to hurricane standards. The market appreciated because everything was new and attractive and to the new county building codes,” Isenberg said. “The market was hot to begin with and that added to it.”
A side effect of the hurricane was at least one new community of what Isenberg called “transplants,” people who lost their homes in Hurricane Andrew. “The west Broward County area exploded. The Silver Lake area of Broward is a crazy hot market now, as well as Miami,” he said.
A geography professor who studies the effect of calamities on real estate values said Andrew had a two-stage effect on southern Florida.
“The first cycle was a momentary price decline that lasted several months,” said Grant Thrall of the University of Florida.
“Then very quickly we got back on pace, with prices returning to their former levels,” said Thrall, echoing the Realtors’ comments. The market returned to its former “hot” status, the geography professor said, with one temporary aberration.
“There was a price decline after about a year and a half to two years of older properties that were not damaged, because there were new properties that were being built,” Thrall said. “You had a competitive supply of new properties come on the market. If you were moving to Homestead and had a choice between a new house and a resold house that survived the hurricane, you would choose the new home,” Thrall said.
Thrall agreed with the two Realtors that the area has rebounded completely. “Today, Homestead does not exhibit any kind of residual price effect from Hurricane Andrew.”
Indeed, the three emphasized that the area is now a red-hot market. In general, Florida has taken a licking and kept on ticking after myriad hurricanes, a National Association of Realtors spokesman said.
Walter Molony of NAR pointed to Florida’s recovery from four major hurricanes in 2004 as examples. Months of temporary disruption were followed by a return of the red-hot housing market, with housing prices hitting new highs in 2004.
“You have very strong market fundamentals in (coastal) states,” said Molony. “You have a very strong coastal draw and strong second-home market.”
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