The extent of the damage caused by Hurricane Sandy in the US has yet to be calculated but the country's property market is already ready preparing for a rocky road ahead. Despite the recovery experienced in real estate this year, flooding and property damage from the hurricane is expected to pose a whole new set of challenges for the sector.
In August, there was a consensus that the market had experienced a significant improvement in quarter two, the Global Property Guide reported. The Federal Housing Finance Agency posted a seasonally adjusted purchase-only house price index rise of 1.12 per cent year-on-year in the second quarter of 2012, following an 8.76 per cent decline during the same period in 2011. Although S&P/Case-Shiller registered a seasonally-adjusted home price index fall of 0.74 per cent, this was the lowest annual decline since the third quarter of 2010.
This created a positive environment for real estate investment in the country, but in the areas affected by the hurricane there is now a fear that the market will plummet to levels experienced at the height of the recession. David Stevens, president of the Mortgage Bankers Association, stated: "We’ll definitely see lower numbers in new sales and new applications. We do expect to see lenders put a freeze on properties across the northeast on the shoreline until they can be inspected and assessed for damages."
The homes battered in eastern coastal states account for approximately one in every five US real estate sales. With transactions on hold, ramifications are expected to be felt nationwide. CoreLogic Inc, a mortgage software and data firm in California, has already predicted to Bloomberg Business Week that USD 88 billion of property across seven states could be affected.
Of this, USD 35.1 billion is in New York, USD 22.6 billion in New Jersey, USD 11 billion in Virginia and USD 7.8 billion in Massachusetts. Maryland, Delaware and Pennsylvania are also estimated to have a combined damage total of USD 11 billion.