Mortgage delinquency rates spike, home prices and rents affected too
The Atlantic hurricane season runs from June through November. Recent years have seen an increase in the number of severe storms and the resulting property damage and personal injury. Experts are predicting an above-normal number of tempests again this year.[1] A look back at last year’s Hurricane Ida shows the effect these storms can have on local housing markets.
Hurricane Ida was a Category 4 cyclone that caused nearly 100 deaths and an estimated $75 billion in property damage, with about two-thirds of the damage occurring in Louisiana.[2] Ida made landfall in Lafourche Parish, which is part of the Houma metro area. Homes and businesses were damaged or destroyed and families were displaced. The financial hardship caused by Ida led to a spike in home mortgage delinquency. In the month following the hurricane, the transition rate from current-to-30-day delinquency, which had been running at about 1% per month, spiked to over 7% in the Houma metro.
Figure 1: Current-to-Delinquent Rate Jumps After a Disaster
Many homeowners experienced ongoing financial trauma. The percentage of borrowers in Houma who were at least three months behind on payments jumped by 50%, rising from 4.4% in September to 6.6% in November even though serious delinquency rates declined 16% nationwide during that same period. Six months after Ida, the serious delinquency rate in Houma remained above Louisiana’s and was double what it had been in the months prior to the pandemic. (Figure 2)
Figure 2: Serious Delinquency Rates Jump After a Disaster
The Houma economy had already been hurt by the drop in oil prices during the early months of the pandemic. With the additional strain of Hurricane Ida, home prices were slow to recover and rents weakened as workers and families relocated. While home prices did rise, they increased less than inflation and less than one-half the national rise recorded in the CoreLogic Home Price Index. Single-family rents also declined despite an annual rise of 13% in the national CoreLogic Single-Family Rent Index. (Figure 3)
Figure 3: After Ida, Houma’s Price and Rent Grew Less Than Louisiana’s
Natural disasters cause extensive property damage, personal injury, a reassessment of hazard risk and disruptions in local housing markets. Similarly, mortgage delinquency rates spike, and the price and availability of shelter are also affected. These effects are likely to reoccur when the next tropical cyclone makes landfall in the U.S.
Summary:
- A hurricane leaves property destruction and bodily injury in its wake.
- Hurricane Ida led to nearly 100 deaths and $75 billion in property damage, most losses in Louisiana.
- Mortgage delinquency rates spiked and serious delinquency remained high months afterwards.
- Home prices were slow to recover: up less than in the state and less than inflation.
- Rent on single-family homes declined in the Houma metro area.
[1] See https://tropical.colostate.edu/forecasting.html
[2] See https://www.nhc.noaa.gov/data/tcr/AL092021_Ida.pdf
