Hurricane Sandy may slow the recovery of the U.S. housing market, predicts Barry Habib, chief market strategist at Residential Finance Corporation (RFC), a nationwide mortgage lender. “The housing market is still fragile, and Sandy is likely to have weakened it," said Habib. "Homebuyers and homeowners should be aware of how this storm will affect them, not just in damage and flooding to properties, but in unexpected after-shocks, too."
Habib identifies key outcomes that homeowners, as well as those looking to buy or sell a home, should be prepared to face in addition to property damage:
►Fewer homes listed for sale: Expect to see a decrease in the number of homes being listed for sale in the mid-Atlantic and Northeast in the months ahead. So if you’re looking for a home, you’ll witness a smaller selection. If you’re selling your home, this could be good news for you.
►Sale contracts being put on hold: Many home sales as well as contracts that are in progress will be put on hold until homes can be inspected or re-inspected for damages caused by the hurricane. If you’re selling your home, don’t be surprised if a buyer interested in your property wants a second inspection of your home. And if your home is under contract, be aware that properties in areas impacted by the hurricane may require another appraisal by the mortgage lender. Estimates at property damage range from $60 billion to as much as $90 billion to date on homes in seven states.
►Fewer people looking to buy homes: Individuals are less likely to be looking for a home when they are spending time rebuilding. Plus, potential homebuyers may also think twice about owning a home if they live in an area where the hurricane has inflicted a good deal of property damage. If you’re in the market for a new home, this may mean less competition for homes. And for those with a home on the market, there may be less traffic from potential buyers, at least in the near term.
►Further delays in foreclosures: The number of foreclosed homes has already been a factor in slowing the real estate market recovery. Damage to properties in key states such as New York and New Jersey will slow the pace of foreclosure sales, further weighing on home prices.
►Lower home prices: Delayed property sales, more reluctant homebuyers, and an increased number of foreclosures will likely mean lower home prices, especially in the areas hit hardest by the hurricane. Depending on whether you’re looking to buy or sell your home, this could either be good news or bad news.
►The potential upside ... lower interest rates: The impact of the storm may keep interest rates low for an extended period of time, Habib notes. That’s a piece of positive news for people in the market for a new home.
“Hurricane Sandy has inflicted much damage to homes and businesses along the East Coast. It would be difficult to overstate the devastation of this storm,” Habib said. “To some, the storm could bear some bad news extending well beyond property damage. For potential homebuyers, lower home prices and continued low interest rates may offer a small silver lining to an otherwise distressing situation. Ultimately, buyers who were on the fence may find that the cost of purchasing a home has become even more attractive. That means good news for both homebuyers and home sellers."