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Houston’s residential real estate market & Hurricane Harvey | single-family home sales decline 24% year-over-year

The Houston metropolitan area has grown by about 400 people a day, building about 40,000 housing units a year. This has made Houston the nation’s largest new-housing market, with seven percent of the nation’s residential construction. Regulation has been light, the civic model tied to growth. Building everywhere and fast, the city has kept housing prices low.

“You have a country that’s divided between high cost places like Bay Area and New York and higher unemployment areas like Detroit, and places like Houston pick up the slack,” observed Issi Romem, chief economist at BuildZoom, a startup that helps people find contractors, both residential and commercial.

The New York Times reported on September 12 that people in Houston are “betting that nothing can stop Houston’s continued growth”.

“Redfin, a national real estate brokerage firm, said its agents had 45 home buyers lined up to purchase homes here when the storm hit. Only eight buyers backed out because of the storm, and tour requests immediately rebounded a week later.

“‘I was shocked,” said Glenn Kelman, the company’s chief executive, who lives in Seattle.

“For now, buyers and sellers are trying to figure out how prices have changed after the flood. The Powells’ potential buyer and many others are looking for a deal on a damaged home.

“At the same time, many economists are forecasting that the price of undamaged homes will rise as demand outstrips supply. Early estimates suggest that tens of thousands of homes were damaged, and developers are worried about labor shortages as repairs get priority over new construction.”

Then, on September 13, Inman reported that Houston homes sales have declined 24% year-over-year in August.

“Home sales were humming throughout the first three weeks of August, but the moment Harvey struck the region, everything came to a screeching halt,” said HAR (Houston Association of Realtors) chair Cindy Hamann.

“HAR’s latest monthly report shows that all segments of the Houston housing market felt the strain.

“August sales of property types across the board totaled 7,077, a 24 percent decline compared to the same month last year, while total dollar volume dropped 22 percent to $2.0 billion. After 10 consecutive months of gains, single-family home sales took a 25 percent year-over-year hit.”

In August, Business Insider gave some thought to the Houston housing market and vulnerabilities. Houston is a city with 800 miles of creeks and bayous that can easily overflow during a storm surge. It has seen 38,000 acres of wetlands disappear in the last two decades due to a construction boom in greater Houston. The city is flat and drainage systems are outdated. Developers, further, have often not followed the federal wetlands mandate. And building regulations have not accounted for historic flooding levels.

 

See:

“Houston housing comes to ‘screeching halt’ after Harvey” | Gill South, Inman, 13 September 2017

“Houston’s Unsinkable Housing Market Undaunted by Storm” | Annie Correal and Conor Dougherty, The New York Times, 12 September 2017

“A Storm Forces Houston, the Limitless City, to Consider Its Limits” | Manny Fernandez and Richard Fausset, The New York Times, 30 August 2017

“Houston was a ticking time-bomb for a devastating hurricane like Harvey” | Leanna Garfield, Business Insider, 28 August 2017

 

#Houston #HurricaneHarvey #Harvey #realestate #realestatemarket #housing #housing market #resilience #Redfin #HAR

 

 

 

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potential balance-sheet exposure to climate-change impacted housing & real estate markets seen as material, & potentially actionable, risk

A bank’s or insurance company’s exposure to the housing market, which might face risks from sea level rise, and to climate risk via their loan books, including via physical impacts to houses on their mortgage books, is considered by Geoff Summerhayes of the Australian Prudential Regulation Authority as a key climate-change induced major or material financial risk to the bank or insurance company and a risk that is actionable by shareholders.

“The potential exposure of banks’ and insurers’ balance sheets to real estate impacted by climate change” may be risks that are “foreseeable, material and actionable now” (Summerhayes, February 17).

While much of the early focus on these risks has been on insurance firms and their exposure to losses from increasingly frequent and severe natural disasters, it is now understood that there are a variety of other potential issues. Other potential issues include the potential exposure of bank’s and insurers’ balance sheets to real estate impacted by climate change.

A case has been filed on 7 August 2017 against Australia’s largest bank, the Commonwealth Bank of Australia that is the first anywhere in the world to test in court how companies are required to disclose climate change-related risks in their annual reports. The case, filed by bank shareholders, claims that the bank’s 2016 directors’ report did not adequately inform investors of climate change risks and seeks an injunction to stop the bank making the same omissions in future annual reports.

A part of the claim focuses on the Commonwealth Bank not disclosing any climate-related risks as major or material risks. “When the bank talks about major or material risks to the bank, we say it should be talking about climate change,” said David Barnden, a lawyer at Environmental Justice Australia who signed the claim on behalf of the applicants.

The Commonwealth Bank of Australia might face diverse risks as a result of climate change. “CBA has exposure to the Australian economy in general. We could be talking about anything from extractive projects to the housing market, which might face risks from sea level rise,” said Barnden.

The case follows a key speech given in February by Geoff Summerhayes of the Australian Prudential Regulation Authority at the Insurance Council of Australia’s annual forum in Sydney. Mr. Summerhayes said that climate change poses both a physical risk and a transition risk for Australian companies.

“The terminology I would like to adopt now, consistent with the FSB Taskforce, is physical and transition risks. I won’t bore you with definitions, but for the sake of clarity:

  1. “1. physical risks stem from the direct impact of climate change on our physical environment – through, for example, resource availability, supply chain disruptions or damage to assets from severe weather.

“2. transition risks stem from the much wider set of changes in policy, law, markets, technology and prices that are part of the now agreed transition to a low-carbon economy.”

Business, he said, needs to stop reporting on climate change as a purely ethical or environmental issue and begin seeing it as a financial problem. He said: “Like all risks, it is better they are explicitly considered and managed as appropriate, rather than simply ignored or neglected.”

“While climate risks have been broadly recognised, they have often been seen as a future problem or a non-financial problem,” he said on February 17.

“To begin with a generalisation, while climate risks have been broadly recognised, they have often been seen as a future problem or a non-financial problem.

“The key point I want to make today, and that APRA wants to be explicit about, is that this is no longer the case. Some climate risks are distinctly ‘financial’ in nature. Many of these risks are foreseeable, material and actionable now. Climate risks also have potential system-wide implications that APRA and other regulators here and abroad are paying much closer attention to.”

“I think the days of viewing climate change within a purely ethical, environmental or long-term frame have passed. More and more, the conversations we are having are about the practical realities and consequences of a changing climate. One reason for this is that we now have a much more sophisticated, granular, quantifiable understanding of the impacts, risks and probability distributions around climate change. This is true on the planetary scale.”

 

See:

“Concise Statement” | Guy Abrahams (and another), Applicants, Commonwealth Bank of Australia, Respondent, signed by David Barnden, Lawyer for the Applicants, 7 August 2017.

“Commonwealth Bank shareholders sue over ‘inadequate’ disclosure of climate change risks” | Michael Slezak, The Guardian, 7 August 2017

“Apra says companies must factor climate risks into business outlook” | Gareth Hutchens, The Guardian, 17 February 2017

“Australia’s new horizon: Climate change challenges and prudential risk” | Geoff Summerhayes, Executive Board Member, Insurance Council of Australia Annual Forum, Sydney, 17 February 2017

#CommonwealthBankofAustralia #climaterisk #financialrisk #materialrisk #physicalrisk #transitionrisk #realestate #housingmarket