NOAA just declared July the hottest month on record. That’s fuel for the wildfires that are eating up vast acreage in the American West and the hurricane season that’s now heating up in the Gulf of Mexico and the Atlantic Ocean.
Besides the loss of life and property, natural disasters add up to a serious hit for real estate investors and property owners alike. In fact, a new report from Porch Research says natural disasters are expected to cost each affected household in the U.S. about $10,500 this year, up from $7,100 in just two years.
The researchers checked the records for the past few decades and discovered that it’s not a wildfire or hurricane that caused the most damage. It was that winter storm that walloped Texas and several other states so badly earlier this year. It caused an estimated $195 billion in damage, the report says.
The list of storms grows, and so does the price tag
Parsing data from the NOAA National Centers for Environmental Information and the American Housing Survey, the Porch researchers found that there were over twice as many multimillion-dollar natural disasters in 2020 than in 2019 -- 208 versus 89 -- and that in the past five years, the U.S. has lost $120 billion a year due to extreme weather events.
The price tag is also growing. The report says the financial fallout of natural disasters in 2021 is expected to be about $215 billion, well more than 2019 and 2020 combined at $162 billion.
They do things big in Texas, nature included. From 1980 through so far this year, Texas has had 129 natural disasters with a total impact of $352.5 billion. Second was Louisiana at 81 and $245.5 billion, followed by Florida at 66 events and $236.5 billion in losses.
Then there’s California at 39 events and $130.3 billion in losses in the past 40 years. Following that, two more hurricane-prone states: North Carolina (92 events, $91 billion in damage) and Mississippi (87 events, $62.1 million). The first noncoastal state to show up on the list is Iowa, with 60 events and $52.4 billion in damage in the past four decades.
The researchers did note the Lone Star State’s sheer size is a contributing factor to its share of the number of disasters and that Hurricane Katrina alone caused 70% of the losses in Louisiana in one very fell swoop in 2005.
Fire and rainstorms darken the horizon, empty the wallet
Wildfires are on the rise -- the four worst in U.S. history have been in California in the past four years -- and they also cost the most to homeowners, the Porch report found, about $10,000 in repairs. For tornadoes, that makes about $7,000 to repair; for floods and hurricanes, about $7,600, the report says.
That’s after outside help. "Around 50% of the disaster repair costs is shouldered by homeowners out of pocket, depending on the particulars of insurance coverage and government support," the report adds.
"About 50% of homeowners who had to make a post-disaster repair in 2019 claim to have financed most of the cost through homeowners insurance. A further 36% said they paid for these repairs with their own cash or savings," the report says, citing the American Housing Survey.
The Millionacres bottom line
The big takeaway here is that real estate investors need to keep very much in mind the potential impact of big weather events to their property and communities. One good idea might be considering investing in those private entities that help in storm recovery. (Obvious candidates there are Lowe’s and Home Depot.)
And don’t be surprised to see insurance rates and repair costs keep rising, especially in particularly vulnerable areas. And given that damage can and does result from the four elements, that’s pretty much everywhere.