With Terry Story, 29-year veteran Real Estate Agent with Coldwell Banker in Boca Raton, FL
Home Sales In The Aftermath Of Hurricane Irma
Steve starts this week’s Real Estate Round-Up by asking Terry Story for an update on existing home sales in her market of Boca Raton, FL. Terry says her phone started ringing almost immediately after Hurricane Irma, with previously registered sellers moving up their timetable to sell and others inquiring what their homes were worth, but Terry does not attribute that to Irma.
In the aftermath of other hurricanes—and Hurricane Andrew in particular—a lot of people moved from South Florida to northern parts of the state, and that exodus created a lot of new construction and new homes for sale, notes Steve.
Tougher Inspection Codes Saved Roofs From Damage This Time Around
But Terry doesn’t see a similar exodus playing out after Hurricane Irma. And while she thought there would be a big push for rentals as people renovate their damaged homes, she hasn’t seen that either, possibly because homes weren’t hit as hard in the Boca Raton region after Irma veered west.
Terry also attributes fewer leaky roofs and, generally, less storm damage to Florida’s four-point inspection rule which includes roofs needing to have three out of five years of useful life remaining in order to get home insurance. Therefore, roofs were more solid as Hurricane Irma came through compared to when Hurricane Wilma struck in 2005 causing a lot of roof damage.
In addition, new homes now have to be built to 170 miles-an-hour winds, and Terry hopes that this new code requirement results in a fresh round of new construction.
Home Re-Inspections After Irma
Next, Terry says she saw a few cases where homes that had previously been inspected but hadn’t closed, needing a roof re-inspection after Hurricane Irma’s wrath. She adds that post-Irma inspections on previously inspected homes were fairly light, with the inspector just walking around the exterior to see if the home sustained any serious damage. Even so, Terry strongly advises prospective buyers to get the inspector back out for a roof re-inspection after severe storms.
Steve cites a case where his neighbor had to have a roof re-inspection and was told that any damages from the storm could be grounds for canceling the home-sale contract. Terry clarifies that contract cancellations are possible if damages exceed 1% of the home’s value, but adds that she hasn’t seen deals fall apart over this because buyers and sellers typically work things out between themselves. Further, if damages exceed a certain amount, either party can cancel or come to mutual agreement or postpone the closing or just come up with a solution that works for both the buyer and the seller.
Homes Sales Down 1.7% Across The Nation
Zooming out of Florida, Steve notes that existing home sales were down 1.7% in August 2017 across the U.S. Terry attributes this to two reasons. First, national data for August reflects the impact of storms and hurricanes, such as Hurricane Harvey in Texas, which brought down national averages. Secondly, the low inventory of homes for sale has simply resulted in fewer sales nationwide.
In wrapping, Steve jokes that the housing market requires brick-and-mortar construction, quite unlike the stock market where a company can simply issue more shares out of thin air if they needed to. Terry agrees and points to another problem, that of very low inventory of new homes for sale, which has also slowed overall home sales across the U.S. and makes Steve wonder why builders aren’t stepping in and capitalizing on this shortage of homes for sale.
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Steve Pomeranz: It’s time for Real Estate Round-up. This is the time every single week we get together with noted real estate agent, Terry Story. Terry is a 29-year veteran with Coldwell Banker, located in Boca Raton Florida. Welcome back to the show Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: Hey, we’ve got a lot going on here because we’ve had a couple of storms, maybe you heard about them.
Terry Story: [LAUGH] Or lived through them.
Steve Pomeranz: Harvey, and Irma, and we were looking at Maria, but it looks like we’re going to miss that bullet. I was just wondering for a while why it seemed like the female hurricanes were being the worst.
But then I forgot about, Harvey.
Terry Story: I heard this, yeah, you forgot about Andrew too.
Steve Pomeranz: Andrew.
Terry Story: I was wondering the same thing.
Steve Pomeranz: Yeah, Wilma, Katrina.
Terry Story: It’s the names. I mean, why are they old names? Irma, Wilma.
Steve Pomeranz: Hell hath no fury like a woman scorned.[LAUGH] All right, so tell us about home sales. Existing home sales. What’s going on in your marketplace?
Terry Story: Well, in our marketplace, we did just go through a hurricane. And interestingly enough, right after the storm, the phone started ringing again. And it’s not that they’re afraid, that they want to move from the storm.
The calls that I’ve been getting are people just moving up their timetable. A lot of them are people that I’ve already met in recent months, and they’ve just decided now is the time. So, I don’t know if it really had anything to do with the storm.
But there seems to be quite a lot of phone calls, people inquiring about what their homes are worth while thinking about selling, but I don’t really relate the two directly to one another.
Steve Pomeranz: Well, in other hurricanes like Andrew especially, where South Florida was really just kind of destroyed in certain areas.
There were a lot of people who just moved north to northern counties, northern parts of our state. They just wanted out. Which created a lot of new business, a lot of new construction, a lot of new homes for sale. You think that Irma, the degree, the kind of the category that hit us here in South Florida, do you think Irma’s going to have that same effect?
Terry Story: I don’t think so. I was actually hoping or was anticipating that there would be a big push for rentals if homes were damaged and people had to get out from mold or what have you for short term. And honestly, I haven’t even seen the phones ringing for that type of situation.
So, basically, what I see is, we lost a lot of trees, a lot of power outages. But really more, I’m not even aware of any home damage with the clients that I’m speaking to.
Steve Pomeranz: With Wilma, we saw lots of blue tarps on the roofs here.
Terry Story: That’s right.
Steve Pomeranz: Which indicated the roof damage, and it was protection from the leaks. We’ve seen nothing like that.
Terry Story: That’s right, and I also think things have changed too. One of the things that you have to go through is a four-point inspection, and part of that four-point inspection is you have to have three out of five years of useful life remaining on your roof in order to get insurance.
And I think since Wilma, that’s really paid off. I think the roofs are more solid. I think the insurance companies want to see that if you’re getting a new house or purchasing a resale, that the roof is solid. And I think that is some of the good things that have come out of Wilma, which was back in 2005, compared to Irma today.
Steve Pomeranz: Yeah, well, there have been significantly higher building standards, and you and I were discussing earlier, we read in one report where these homes are being built to withstand 170 mile an hour winds.
Terry Story: Yeah, and I’m wondering if that’s going to have an effect. I don’t know what the insurance companies are going to do, but we could use new construction.
I mean, that would be great if we all had homes that withstood 170 mile an hour winds.
Steve Pomeranz: Yeah, that’s a lot.
Terry Story: It really is…I mean, that’s really catastrophic.
Steve Pomeranz: Have you had to go through any re-inspections, people selling their houses and everything has been inspected and then the hurricane hits, and now they haven’t yet closed, so they have to have it re-inspected. What’s going on there?
Terry Story: Yes, yes, if the home’s already been appraised, and you’re waiting for closing, there’s that window of time. And I have one particular house, it just got re-inspected yesterday.
And the re-inspection is pretty light in this particular case, they just walk around the exterior, they don’t do complete re-inspections. If I were to be buying a house during this window of time, especially if it’s an older roof, I would certainly get my inspector back out to check the roof because in this particular case, the owner confessed that she developed a roof leak, and the seller’s taking care of it. But she could have been very dishonest about it, not told us. And if the buyer didn’t do his due diligence and have it re-inspected, then he would be buying a house and soon discover that he has a new roof leak.
Steve Pomeranz: I have a neighbor who sold their house and was in that exact situation. She told me that her attorney said that if there was any difference, if there was any negative change, let’s say, between the initial inspection and this re-inspection, that they could cancel the contract.
Terry Story: Well, yes, but there are clauses, and I’m not going to give you the exact amounts, but I think if it’s like the amount is greater than 1%, either party can cancel. There are provisions in the contracts, but generally, even with Wilma, I didn’t have any deals fall apart. They just worked through them.
The seller can give a certain amount—I think it’s 1.5%. They can give a credit for those repairs. And then if it exceeds a certain amount, either party can cancel or come to a mutual agreement and postpone the closing, there are different things that you can do. But absolutely, if you’ve gone through a storm, since we’ve gone through this storm, if you are purchasing a house and you’ve already had it inspected, definitely go ahead and do the re-inspection, especially for the roofs.
Steve Pomeranz: Okay, we’ve been talking about South Florida, but what about the rest of the country, what’s the state of home sales in the rest of the country? Have home sales been going up, have they been going down? What’s going on?
Terry Story: Well, according to the August report, sales are down 1.7%, and the reason really for this…well, there are two reasons.
This is a national study and it takes into account Harvey and Wilma, which hit two major areas, but also the fact that there’s just low levels of inventory.
Steve Pomeranz: So, we’ve been talking about the local South Florida area, but with reference to the entire country, are sales rising or falling? What’s going on right now?
Terry Story: Well, based on the August report, sales feel about 1.7%. That’s a national look at things.
This also factors in hurricane Harvey and Irma. Now, the part of the reason also that the sales are down, is the basic fact that there is very little inventory all across the nation.
And when you have low levels of inventory that you don’t have much to sell, you can’t have an increase in sales.
Steve Pomeranz: Yeah, if you’re going to be buying, there’s got to be houses for sale. [CROSSTALK]
Terry Story: You have to have inventory.
Steve Pomeranz: I know, and you’re talking about bricks and mortar, so it’s not like a company that can just issue more shares of stock or something. You’ve actually got to go out and build something.
Terry Story: You’ve got to build houses and that brings us to another problem, the new inventory and new homes are really down.
Steve Pomeranz: Yeah, I don’t understand. I really don’t understand why builders aren’t incredibly capitalizing on this shortage. But you know, Terry, we are out of time, so we’re going to get to this in another time. Of course, my guest, as always is Terry Story.
Terry is a 29-year veteran with Coldwell Banker located in Boca Raton, Florida and she can be found at terrystory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.