Piling on

By: J. David Chapman/September 3, 2020

We are getting used to active hurricane seasons in the Gulf of Mexico and wildfires in the western U.S.; however, what Texas, Louisiana and California have encountered this year in the midst of a historic pandemic is absolute piling on when it comes to natural disasters.

The damage to real estate and the built environment by Hurricanes Marco and Laura and the massive wildfires in Northern California has put first responders, researchers, insurance adjustors and emergency agencies in overload. The country’s psyche was already on edge with the pandemic in full force, civil unrest in major American cities; now throw in two very strong hurricanes and one of the worst wildfire seasons in history and it is just about more than the American society can handle.

More than a million acres have been consumed by wildfires in California, after a series of freak lightning storms. These fires have killed at least five people and destroyed more than 1,000 structures. Meanwhile, Hurricane Laura crashed into southern Louisiana last week as a Category 4 storm, with winds of 150 mph, causing widespread flooding affecting almost 600,000 homes, with a reconstruction cost value over $125 billion.

As these natural disasters displace tens of thousands of people, some are having a tough time finding both short- and longer-term housing. These rentals are expensive and many of the affected were already dealing with unemployment loss of income and financial insecurity indirectly caused by the pandemic. Rebuilding is a big task in the best of times, and the pandemic is going to bring a unique challenge to the process. This displacement of people and wide-scale damage to housing are likely to exacerbate a long-running housing shortage and affordability problem, especially in California.

This year, lumber prices were up more than 125% since mid-April because of record homeowner remodeling projects and new home construction during the pandemic. This confluence of disasters is also likely to drive the prices up for construction workers and building materials in the affected regions and possibly lead to shortages throughout the U.S. Construction trade jobs have been an especially positive spot in an otherwise difficult employment situation during the pandemic. We are hoping material shortages and affordability issues don’t slow the construction in other areas of the U.S. while our brother and sisters in these affected areas rebuild their lives and homes.

J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).