After Hurricane Sandy inflicted damage upon thousands of homes along the Northeast Atlantic seaboard, towns in its path have faced a succession of claims adjusters, contractors and construction crews, and finally, speculators seeking bargains on ocean properties that once commanded premium prices.
But problems in storm-impacted housing markets may linger for years. Even homeowners whose homes escaped catastrophic damage face prolonged uncertainty about what it will cost them to raise their foundations to meet more stringent, federally-established, flood-insurance requirements. Potential homebuyers must factor expensive future renovations into their purchase price, further complicating market valuations.
"There's activity but not a lot of sales," says Michael Tassillo, owner of The Tassillo Group of RE/MAX Real Estate in Brick, N.J., one of the coastal areas hit hardest by the storm. "Some of the houses that got severe damage are being bought by local builders just for the land." The speculators believe that the market will recover, he says, and "want to take the chance of buying lots and holding onto them."
When deals for damaged homes occur, they're purchased with cash at deeply discounted prices based upon the value of oceanfront property rather than existing dwellings, according to local realtors.
Not surprisingly, some buyers are willing to walk away from this uncertainty. "None of the people selling now want the aggravation or expense of razing their homes," explains Michelle Rosenkoff, a realtor who not only lost the real estate office she shared with Tassillo, she's been out of her Brick, N.J. home since she evacuated two days prior to the storm. Residents who have sold typically owned their homes outright, and have sold at prices 40 percent below what the market sustained prior to Sandy, she added.
Rosenkoff is one of thousands of area residents concerned about proposed Federal Emergency Management Agency (FEMA) flood zone classifications that may spur homeowners to raise (and bolster) their foundations in some cases by five or six feet, a process that can easily cost $100,000 depending upon the size of the structure and its proximity to water. However, residents in these storm-impacted communities are asking their elected officials to fight these proposed requirements - just as New Orleans residents have done since Katrina struck in August, 2005. Federal grants of up to $30,000 are available to homeowners for whom these homes are their primary residence - not always the case in coastal vacation areas.
Tassillo says many residents are waiting for government and insurance checks before repairing storm damage, but only 30 percent of claims have been paid. "A lot of [New Jersey residents] will have to try a short sale or walk away because there's not enough money," he says. "We may see more of that in the next 90 days as insurance claims are starting to be settled."
Yet, except for homeowners who have completely lost their homes, it's possible that rising market prices may eventually bail out those who refuse to sell their homes. According to Zillow's Home Value Index, the bottom in these storm-impacted towns actually arrived in August, several months prior to the late October superstorm. Housing data supplied by Zillow suggests that the hurricane may have slowed the regional housing recovery but it hasn't stalled it altogether.
Here's what's happening in four storm-impacted markets, according to the Zillow Home Value Index report:
- Mantoloking, N.J., the average home is $2.72 million up 1.8% on a year-over-year basis, but down from $3.25 million in April, 2008. The market appears to have bottomed in August 2012, nearly three months prior to Hurricane Sandy. Listings have dropped by 23% from Jan. 2012 to Jan. 2013, according to Zillow.
- Brick, N.J., the average home is $219,700, up slightly from the August trough of $214,000, but down substantially off of April, 2008 levels of $280,000. While New Jersey has seen a 1.9% gain on a year-over-year basis, Brick is up only .6%. Listings have dropped by 12.4% from Jan. 2012 to Jan. 2013, according to Zillow.
- Toms River, N.J., the average home is $236,000, up slightly from the August trough of $230,000, but down from $294,000 in April 2008. On the bright side, homes have climbed 2% on a year-over-year basis. However, the number of listings have dropped by 12% from Jan. 2012 to Jan. 2013, according to Zillow.
- Long Island City, Queens, New York City (zip code: 11101), the average home is $465,700, down sharply from early November - the aftermath of Sandy - when prices were $490,000. However, the bottom appears to been reached in November 2011, when homes averaged $401,000. Though home values have dropped since Sandy, prices are still up 12.7% on a year-over-year basis. In zip code 11101, the number of listings have dropped by 42% from Jan. 2012 to Jan. 2013, according to Zillow.
"The smart money is to sit tight and see how it all shakes out," recommends Karen Hewson, a realtor who lives in Bay Head, N.J. She and her husband Richard, also a realtor with Gloria Nilson Real Living, lost the entire first floor of their home in the storm. "We had 17 inches of water in our house, but it's all being repaired and life goes well," she says. "By this summer the beaches will be open and life will be wonderful."
Rosenkoff expects that it will take years for homes such as hers to be fully renovated and for housing prices to recover to the price she paid seven years ago for her one-story home in Toms River, N.J. "I'm stuck between a rock and a hard place, unless I walk away from my house, which I would never do, " she says. "It's very frustrating." Meanwhile, homeowners, homebuyers and state and federal regulators are tracking these storm-impacted markets to see whether prices will continue to slowly recover.