The fury of Mother Nature can wreak havoc on a neighborhood. Wildfire, hurricanes, volcanoes and earthquakes can leave significant destruction in their wake, as many communities in the U.S. have witnessed first-hand. The severe damage to homes and commercial buildings, and displacement of families and businesses, has major impacts on property and mortgage markets.
The disruption of a family’s regular flow of income and payments, as well as substantial loss in property value, can trigger mortgage default. It affects not only homeowners who have seen their homes destroyed, but also workers who no longer have a job to go to. After last year’s trio of hurricanes – Harvey, Irma, and Maria – serious delinquency rates on home mortgages tripled in the Houston and Cape Coral metro areas, and quadrupled in San Juan. The Tubbs wildfire caused serious delinquency rates to spike by 50 percent in the Santa Rosa, CA area. (Figure 1) While payment forbearance programs provided by FHA, lenders, and secondary market investors can lessen the financial stress, local default rates still rise.
The significant loss of housing stock also affects the cost of shelter in affected neighborhoods, especially those that had already had a severe shortage of homes. Take the Tubbs fire as an example: More than 3,200 homes were destroyed, or about 2 percent of the single-family stock in Sonoma County. And for some affected neighborhoods, the loss was close to 100 percent.
Families that were displaced by the fire add to the demand for shelter in the metro area. The increase in demand coupled with the reduction in housing stock translates into upward pressure on prices and rents for undamaged homes. CoreLogic’s rent data have documented the increases: In Santa Rosa, single-family rents have risen at a double-digit pace after the Tubbs fire, and rent growth in the Houston and Cape Coral metro areas accelerated after hurricanes Harvey and Irma. (Figure 2)
Based on what we have seen after prior natural disasters, communities affected this year by wildfire, hurricanes, mudslides, and volcanic eruptions will likely experience an increase in mortgage default and shelter costs.
 Hurricane Harvey made landfall in Texas on August 25, 2017, Irma reached the Florida mainland on September 10, 2017, and Maria arrived on the Puerto Rico coast on September 20, 2017. The Tubbs fire began October 8 and was fully contained by October 31, 2017. See https://www.nhc.noaa.gov/data/tcr/index.php?season=2017&basin=atl and http://cdfdata.fire.ca.gov/incidents/incidents_details_info?incident_id=1867.
 CalFire reported 5,636 structures destroyed as a result of the Tubbs fire. Many properties had more than one structure on them and some were nonresidential, so the total number of homes destroyed was less than the number of structures. The 2016 American Community Survey reported 153,000 occupied one-family homes and mobile homes in Sonoma County.
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