Hurricanes could result in $1.8T of property damage in 2019: CoreLogic
In the worst-case scenario, $1.8 trillion in reconstruction costs could result from coastal storms in 2019, even as hurricane experts predict a near-normal year for this season, a CoreLogic report said.
More than 7.3 million single-family and multifamily homes on the coasts of the Atlantic Ocean and Gulf of Mexico are in danger of damage from the storm surge related to a hurricane in the vicinity.
While the Miami-Fort Lauderdale-West Palm Beach area has the most single-family properties at risk from storm surge with 791,775, the New York metro area has a highest reconstruction cost value at $283.3 billion because of population density. The Miami area is second at $157.7 billion and New Orleans is third at $100.9 billion.
For last year's storm season, CoreLogic issued a $1.6 trillion estimate. Besides new construction along the coast, part of the reason for 2019's increase is CoreLogic now includes multifamily structures in its study. Adding in multifamily properties increases the estimate for New York to $330 billion; for the Miami area, the estimate rises to $166 billion. The reconstruction cost value is based on the total destruction of the property and the combined cost of construction materials, equipment and labor to replace it.
The strength of the hurricane is less important in calculating potential damages than the density of the area.
"Damage from storm surge and inland flooding has proven to be far more destructive than wind in recent years, so we cannot rely on the hurricane category alone to give us a sense of the potential loss," Tom Jeffery, senior hazard scientist at CoreLogic, said in a press release. "A Category 5 hurricane in an area with few structures may be far less devastating than a Category 1 hurricane in a densely populated area."
Borrower payment defaults typically rise following a natural disaster like a hurricane. Even though borrowers typically get a forbearance and the mortgage cures quickly, the servicer is still responsible for passing along any funds due to the investor. That recovery time could take more than a year, depending on the severity of the story, a recent BuildFax report found.
Not all properties affected by storm surge are covered by flood insurance. Homeowners' policies do not cover water damage.
During 2018, there were just two storms at Category 3 or greater that made landfall. After Hurricane Florence struck the Carolinas and Virginia, CoreLogic gave a worst-case projection of $28.5 billion in storm surge and inland flooding losses and an additional $1.5 billion in wind damage. Insured flood losses from Florence were between $5 billion and $9 billion, CoreLogic said in this year's report.
Hurricane Michael caused over $6 billion of damage in Florida; prior to the storm, CoreLogic said it had the potential to result in $13.4 billion of reconstruction costs.