When things dry out, will I still be able to afford to buy in Nashville?
May 3, 2010 7:02 AM Subscribe
What will the flooding in Nashville do to the housing market over the next two to three years?
I lived in the Nashville area for most of the 90's and was hoping to moved back there in 2011-12 and buy a house. I am specifically interested in East Nashville area (Inglewood and Lockeland Springs). I have lots of friends and family there, and while everyone is safe, almost everyone is also flooded to some degree (mostly basements). As the river continues to rise it looks like more and more houses will be significantly damaged.
So those of you who live in an area that has seen a similar disaster, or who have a good feel for real estate, what will happen to the market overall? Will it be driven significantly up as people look for new houses? Or will there be more deals since people will now have had a "flooding event"?
I hope this doesn't seem callous... my heart is breaking for the city I love. But I am trying to get my ahead around how this may affect my future plans to return there.
I lived in the Nashville area for most of the 90's and was hoping to moved back there in 2011-12 and buy a house. I am specifically interested in East Nashville area (Inglewood and Lockeland Springs). I have lots of friends and family there, and while everyone is safe, almost everyone is also flooded to some degree (mostly basements). As the river continues to rise it looks like more and more houses will be significantly damaged.
So those of you who live in an area that has seen a similar disaster, or who have a good feel for real estate, what will happen to the market overall? Will it be driven significantly up as people look for new houses? Or will there be more deals since people will now have had a "flooding event"?
I hope this doesn't seem callous... my heart is breaking for the city I love. But I am trying to get my ahead around how this may affect my future plans to return there.
Best answer: I work in insurance, not real estate, but it seems to me that the impact will be more idiosyncratic than systemic. If a given house is significantly damaged, its value will drop unless it is adequately renovated in such a way that will alleviate concerns of undiscovered, unremediated damage. If such renovations are made, its value will go up commensurate with the quality of the renovations and updates.
But I haven't gotten the impression that people who weren't already planning on moving are going to move as a result of the flood, so I'm not seeing any reason why there should be a spike in supply or demand for houses in the area.
I'm not seeing anything which suggests that the market will be all that different in a year or two than it is now. At least not based on the flood. I think there's far more reason to worry about the lingering financial crisis and potential flood of foreclosed homes entering the market than anything related to this disaster.
posted by valkyryn at 7:38 AM on May 3, 2010
But I haven't gotten the impression that people who weren't already planning on moving are going to move as a result of the flood, so I'm not seeing any reason why there should be a spike in supply or demand for houses in the area.
I'm not seeing anything which suggests that the market will be all that different in a year or two than it is now. At least not based on the flood. I think there's far more reason to worry about the lingering financial crisis and potential flood of foreclosed homes entering the market than anything related to this disaster.
posted by valkyryn at 7:38 AM on May 3, 2010
Best answer: I think the actual flooding will have little or no effect on the market. First, there are many, many factors that affect the housing market, including the economy in general, the employment picture, the cost of money, the tightness of credit, etc, etc.
I lived in San Diego County during the time that 3000 homes were burned down in a massive brush fire. There was almost no impact, either up or down, in the housing market. My home, that had fire within one mile in each of three directions, sold two years later after being on the market for three days. If it were on the market today, it would probably sit for months. Market forces are sometimes greater than natural forces.
That said, if the particular house or neighborhood you end up looking at was drastically affected by this flood, the housing prices may be a bit depressed due to the added risk anyone who buys there might undertake. (This would be you.) The general rule of "You get what you pay for..." applies here. If you want the added burden of undiscovered flood damage, possible mandatory flood insurance, possibly higher loan interest due to increased risk and can balance these things against the bargain price you might get, go for it.
posted by Old Geezer at 9:39 AM on May 3, 2010
I lived in San Diego County during the time that 3000 homes were burned down in a massive brush fire. There was almost no impact, either up or down, in the housing market. My home, that had fire within one mile in each of three directions, sold two years later after being on the market for three days. If it were on the market today, it would probably sit for months. Market forces are sometimes greater than natural forces.
That said, if the particular house or neighborhood you end up looking at was drastically affected by this flood, the housing prices may be a bit depressed due to the added risk anyone who buys there might undertake. (This would be you.) The general rule of "You get what you pay for..." applies here. If you want the added burden of undiscovered flood damage, possible mandatory flood insurance, possibly higher loan interest due to increased risk and can balance these things against the bargain price you might get, go for it.
posted by Old Geezer at 9:39 AM on May 3, 2010
Response by poster: Thanks for these really thoughtful answers. I know that no one here can predict the future, but I am reassured that I probably don't need to drastically rethink my course of action.
posted by kimdog at 12:39 PM on May 3, 2010
posted by kimdog at 12:39 PM on May 3, 2010
This thread is closed to new comments.
"Montz and Tobin (1998) Tobin and Montz (1994a) are evaluating how extreme floods
affect real estate prices. So far their work in Linda and Olivehurst, California, indicates that
residents with the most severe flooding do see long lasting impacts on the house price. Homes with limited damage seem to be unaffected. In fact the prices go up for some homes in damaged areas because following the flood, the homeowners replace all the appliances, paint and carpets. The houses increase in value to reflect the sprucing up. The results show clear spatial variation across the cities."
My completely non-expert theory is that prices will go up in the short term (1-2 years). A lot of the badly damaged houses will probably be demolished and there will be a drop in supply along with increased demand until lots are re-purposed or rebuilt.
Actually it occurs to me that now I might get completely hosed looking for a rental in the next couple months.
posted by ghharr at 7:21 AM on May 3, 2010