Rise in hurricane recovery times could strain mortgage servicers
The potential for longer homeowner recovery times from hurricanes could hurt mortgage companies that need to advance funds to investors from missed payments.
The average recovery time for a property damaged by a hurricane has been 10.7 months, which means some borrowers in states affected by last year's storms are still in the repair stage, according to BuildFax's examination of 11 major hurricanes between 2000 and 2018. For more severe storms like Hurricanes Harvey and Irma in 2017, the rebuilding effort took over a year.
"However, the combination of hurricane activity and the implications of a slowing housing market could lead to even longer recovery timelines," the April Housing Health Report said.
Early meteorological forecasts are projecting a below-average season for hurricanes in 2019, but there is still a significant backlog of damaged housing from past storms to work through.
Nationally, there was a 2.45% year-over-year increase in existing home maintenance volume during the month, marking the first rise since October 2018. There was a 5.07% year-over-year decline in March.
"While there is always a spotlight on new construction, maintenance is also a must-watch indicator — it reflects the health of the existing housing stock, which comprises 90% of all U.S. properties," said BuildFax CEO Holly Tachovsky in a press release. "This month's maintenance gain is a positive sign amidst a housing slowdown and we'll be watching whether this activity remains stable over time."
In particular, maintenance activity in North Carolina and South Carolina rose 3.09% and 2.96%, respectively, compared with April 2018. The increase was attributed to repair work related to Hurricane Florence, which made landfall in September and resulted in higher mortgage delinquencies in both states.
(Even with forbearance programs because of natural disasters, any loan where the borrower misses a payment is considered delinquent for reporting purposes.)
Maintenance activity in Florida declined by 10.03% compared to the same month a year ago. However, that drop was largely related to the completion of rebuilding work associated with 2017's Hurricane Irma, which had a more severe effect on the state than the more recent Hurricane Michael. Repairs to damaged homes are still pending in the Florida Panhandle due to the 2018 storm.
"While Hurricane Michael was also significant, delayed aid packages have left the area without the means to rebuild as quickly, lessening this month's activity," the report said.
Meanwhile single-family construction authorizations continued to decline, down 8.23% on a year-over-year basis and 4.53% from March.
Remodeling volume, a subset of maintenance that includes renovations, additions and alterations, fell by 0.95% compared with the prior year.