After Hurricane Helene, should I buy property in Florida at a reduced price? Is now a good time to strike a deal?

By Aarthi Swaminathan

'Many of those owners were not insured or underinsured'

Dear Big Move,

A lot of expensive beachfront real estate in Tampa and the St. Petersburg area has been damaged or destroyed by Hurricane Helene. Many of those owners were not insured or underinsured. Can I get a good deal there right now?

Hungry for Deals

Related: We bought a vacation home for $1 million in 2000 and it's doubled in value. How can we avoid capital-gains tax?

Dear Hungry,

You have a lot of chutzpah, I'll give you that.

While this may come across as a distasteful question for some, particularly given that many homeowners in those parts of the nation are dealing with severe damage to their homes which they must have spent a lot of their hard-earned money on, you're probably not the only person to ask such a question.

I'll reserve judgment on your question and, instead, focus on the answer. And the answer? It depends on how much money you have. If you need to take on a mortgage to buy a property as an investment, which is what you're hinting at, you will likely face a tough time buying property in the path of Hurricane Helene.

Some context on the devastation: The Category 4 storm on Sept. 26 left a trail of destruction and more than 200 people dead, the Associated Press reported, adding that it's the deadliest hurricane to hit the mainland U.S. since Hurricane Katrina in August 2005, according to the National Hurricane Center.

If you need to take on a mortgage to buy a property as an investment, you will likely face a tough time buying property in the path of Hurricane Helene.

Many mortgage lenders require borrowers to get home-insurance coverage before they lend you money. So even if there are deals to be had, you're going to have a hard time closing under such trying circumstances. In fact, most Florida homeowners in the path of Hurricane Helene did not have flood insurance, according to data from the Insurance Information Institute.

"But most private insurance companies don't carry flood insurance, leaving the National Flood Insurance Program run by the Federal Emergency Management Agency as the primary provider for that coverage for residential homes," AP reported in the aftermath of Hurricane Helene. "Congress created the federal flood insurance program more than 50 years ago when many private insurers stopped offering policies in high-risk areas."

"FEMA announced it could meet the immediate needs of Helene but warned it doesn't have enough funding to make it through the hurricane season, which runs June 1 to Nov. 30 though most hurricanes typically occur in September and October," AP added. "Even if a homeowner does have it, FEMA's National Flood Insurance Program only covers up to $250,000 for single-family homes and $100,000 for contents."

A high-risk hunt

It's a different story if you do have enough cash to buy a home outright. If you have enough money to buy the house, repair it to make it more resilient so that it can withstand future disasters such as hurricanes and storms, then you might find a good deal. However, the risks remain the same. You will likely face a large out-of-pocket if your home is damaged and/or destroyed by another storm.

Many people in the area are already giving up on their waterfront properties because of the hurricane-induced damage, mortgage broker Justin Kelly, who grew up in the Tampa area and lives close by, told MarketWatch.

"It's pure devastation. It's to levels that I haven't seen in my 40 years," Kelly, who obviously has a vested interest in people buying and selling property in the Sunshine State. "I've experienced a lot of flooring here over my lifetime, but nothing like we just saw."

Many Tampa-area homeowners, now experiencing their second hurricane in two years - Helene in 2024 and Idalia in 2023 - are simply fed up, he said. People "get in their heads," he said and declare that they don't want to live on the waterfront, or in a low-lying flood zone. That may open up more properties for sale, but you should proceed with caution.

Buyers and sellers face the same big questions: They don't know what climate change and future weather patterns mean for these properties in the hurricane path. "I've gotten a lot of phone calls from people wanting to get off the water," Kelly added, as well as from people who have changed their minds about wanting to buy a waterfront property.

But home values, overall, have gone up regardless of the hurricanes. The typical home value in Tampa, Fla., has risen by 2.5% from a year ago, to $382,000, according to an estimate by Zillow. The median sale price is about $397,000 as of July 31.

In a market which frequently experiences weather incidents, the cycle of buying and selling can pick up again when the storm is in the rearview mirror. Kelly noted that - even though homeowners suffer extensive damage from hurricanes - their plight is forgotten in a matter of years, as new buyers enter the market. And that puts the local housing market back on a normal pace - for the time being.

Cash buyers

So for real-estate investors and buyers looking at this situation, there is opportunity, he added. "People are just gutting their house, putting it in the front yard, and then putting the house up for sale at a rather large discount," Kelly said.

Before you jump in, do your own research on property values relative to storms, as well as the cost to rebuild.

Even though home values in these areas tend to bounce back after disaster strikes, climate change and the frequency of disasters and hurricanes in the future is not something one can predict with certainty. You might end up spending tens of thousands of dollars fixing up properties year after year, due to the hurricanes. And the cost of rebuilding can also change if local authorities decide to impose new rules on construction.

The Tampa market is one that is relatively flush with cash buyers: About 37% of home sales in the Tampa metro area were paid for in cash as of June, says real-estate brokerage Redfin. What's more, Florida is a national leader in cash-only home sales, as Axios reported in May.

When it comes to beachfront property, there will likely always be a demand, Kelly said.

Some buyers will always be upbeat on the demand for waterfront properties, but that does not mean you have to be.

Bear in mind that these are homes that need lots of care in order to bring them back up to a liveable condition, Kelly said. If you have the cash to buy the properties, repair them, and also insure it by themselves or get them into a place where they can get adequate insurance coverage, then invest at your own risk.

The Big Move' is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.

Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.

-Aarthi Swaminathan

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10-07-24 0935ET

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