Today’s post is by our superstar top producing agent, Steve Remmert. Below Steve shares his thoughts about the Boulder Flood and how he thinks property values will be affected.
It has been over a month since the flood of September 12th hit Boulder, and though we are now dry there are many who are still struggling to reassemble their lives. Many clients have asked me how I thought the real estate market would be impacted as a result of the floods. I thought that I would take a moment and share my expectations.
I have done some research into how natural disasters affect real estate. The closest relevant comparisons are hurricane Sandy or, more locally, the 2010 Four Mile Canyon fire. With regards to the Four Mile Fire, prior to the floods, the mountain market, outside of the “burn zone”, was on its way to a recovery with much of the lost equity returned. We did see a notable decline in sales immediately following the fire but over time, sales volume increased and property values stabilized.
I site hurricane Sandy because much of the impacted areas were roughly the same socioeconomic background and housing price points as the Boulder market. As in New York, within the designated floodplains, the cost of homeownership is likely to slightly increase. This is due to the potential increase in the cost of flood and other related insurance premiums. It is also likely that until prospective buyer’s memory of the recent events fade, the perceived value of those impacted homes will decrease as the demand weakens. In the wake of hurricane Sandy the immediate effect was a dramatic decline in home sales, but by the end of the Q2 of this year 2013 the effects of Sandy had decreased and the market had also begun to stabilize. Property values have not returned to their previous high but as they re-build and as time elapses, I expect that most or all of the lost equity will return to the market.
As a result of the floods, I think we have all re-evaluated the potential consequences of living in a flood prone area. Consequently, I expect to see a decrease in sales and a decline in value within the designated floodplains. I expect this to last for about 18 months depending on the severity of the impacted area. Inversely, we should see a slight increase in sales of homes outside of the designated floodplain. Any buyer should have confidence that if a home withstood the impact of last month’s rains, it is a pretty safe bet and that flooding is not a concern.
Rest assured, that with the exception of some truly devastated areas, the real estate market will not be dramatically impacted and it will shortly return to its normal pace. In the short term, it may feel worse than it is because we are also moving into our slowest time of the market. A typical seasonal slowdown is already expected but after the holidays, we should be back to our previous sales levels. Boulder is still one of the greatest places to live and that will never change.
I also want to point out that I see a notable distinction between homes that were damaged by flood waters and those damaged by oversaturation of the soils surrounding the homes. Yes, they both got wet and they are both considered flood damage, but the damage as a result of oversaturation of the soil is largely preventable and will not deter many buyers from buying that house in the future. That being said, for both categories, I suggest taking measures to protect against a recurrence. The potential remedies can be as simple as proper gutter systems and site grading to move moisture away from the foundation. Also I strongly suggest that if your house was impacted, document all damage and all communication with insurance and the various contractors (include pictures). A future buyer is going to want to know the source of the water problem and how it was repaired. Your repair and documentation will be critical to their becoming comfortable with purchasing your property.
For those whose insurance is not covering losses, my accountant informed me that house repairs due to natural disaster damage are tax deductible. There are certain limitations, as with all deductibles, but if you have had damage that is more than 10% of your annual income than it is likely then you will receive a deduction from the IRS. Here is a link detailing how to compute the deductions. http://www.irs.gov/pub/irs-
My heart goes out to those of you that have been impacted and I hope for a quick recovery. If there is anything I can do or advice I can provide, please let me know.
Colorado Landmark, Realtors
Flatirons Photo Credit: Bob Carmichael Productions