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Study: Hurricane can actually raise home prices

December 22, 2010 - It's not uncommon for those living in hurricane-prone areas of the country to consider packing their moving boxes out of concern of the storm's destructive force. However, a new report may shed light on what's known about hurricanes' economic impact.

Using evidence from coastal cities around the country, researchers with the Dallas Federal Reserve were able to determine that a single hurricane strike was actually able to raise home prices for a number of years. In maximum instances, home prices rose 3 to 4 percent three years after a major storm.

Researchers constructed a model which judged the destructiveness of 13 hurricanes on local areas. Once they had a model in place, they studied home prices in 99 coastal areas in 19 states over the period from 1988 to 2005. The bank analyzed quarterly home price indexes provided by the Federal Housing Finance Agency.

The findings showed that prices may have risen in those areas because hurricanes eliminated a larger portion of the housing stock compared to any loss in population. With fewer homes around to purchase, prices typically rose.

Major disasters can often have distorted affects on home values, sales and the relocation activity of certain areas. CoreLogic reported this summer that homes in regions impacted by the Deepwater Horizon Oil Spill could lose $3 billion in value over the next five years.
 

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