What the 33-year-old energy-company manager didn’t know was that it would take her six months and $1.4 million to buy a 4,000-square-foot, three-bedroom, 3½-bathroom house in the former middle-class enclave.
Across town, in the affluent, manicured suburb of Bellaire, James Holland, a top executive at one of the largest energy-infrastructure companies in North America, spent an unexpected four-plus months to sell his stately brick 4,600-square-foot, four-bedroom, four-bathroom house with a generous backyard. And it took a price cut to get it done, dropping from $1.179 million to $902,000. Mr. Holland’s home didn’t flood during Harvey but his neighborhood did, and the area remains spotted with empty houses, teardowns and land lots for sale.
A year after Harvey hit, home sales in Houston are up 37.2% over 2017 and up 7.2% from two years ago (a fairer comparison because the hurricane halted activity for weeks in 2017). Some 8% of the people affected by the storm still haven’t been able to return to their homes, and 15% of damaged homes remain unlivable, according to a report by the Kaiser Family Foundation and the Episcopal Health Foundation.
Hurricanes like those that have pummeled the coastal U.S. can dramatically alter the real-estate map of cities. In addition to the arduous task of rebuilding, even well-established cities experience changes in the dynamics of individual neighborhoods. As might be expected, prices in areas that flooded tend to drop, while prices in areas with minimal damage appreciate. But even homes on streets that see little water can still be hard to sell because of greater damage nearby.
The contrasting fates of neighborhoods post-hurricane in Houston is illustrated by the Heights and Bellaire. “There has been a knee-jerk reaction from certain buyers who avoid regions completely,” says Paige Martin, a broker with Keller Williams Realty. “We are seeing value in these areas.”
In the gentrifying Heights, old Craftsman and Victorian homes are being remodeled, large homes are going up on small lots, and new and rebuilt restaurants, stores and coffee shops are opening. Old car lots make way for new home developments, while family-owned hardware businesses stand strong.
The median sales price of homes in the Heights rose 8.2% to-date in 2018 from the year earlier, according to the Houston MLS.
Meanwhile, in traditionally affluent Bellaire, the median sales price of homes fell 11.8% over that same period. Blocks of houses sit empty as if frozen in time, with family photos still on the walls, appliances removed and patio furniture covered. Some are waiting to be torn down; others are in the process of being elevated—about two feet—off the ground to comply with new building codes. Vacant lots with for-sale signs are interspersed with partially finished new construction.
Robert Caserta, a 45-year-old high-level manager at ExxonMobil, searched for a year for a house when he moved to Houston from Chicago last November. At first he was interested in Bellaire, but changed his mind when his friends who lived in the Heights assured him they’d had no flooding in any of the city’s major storms. That broke his initial apprehension about the neighborhood’s juxtaposition of million-dollar homes with tire shops.
“I started to see the charm and character through the noise,” he says. He marked off a 15-block radius, but when he couldn’t find a home there, he ended up buying a 3,600-square-foot newly built house for $1.22 million just outside his targeted area.
Kara Goodloe has been looking for a house in the Heights for about four months. “You have to be really patient and jump on something when it comes up,” she says.
The 40-year-old chief operating officer for an energy private-equity firm has lived in the neighborhood twice before, in-between stints in New York and Oklahoma. But this time around, she says, it has been harder to find a home because there are no medium-size houses. They are either small and need to be torn down, are approaching 4,000 square feet with no yard, or are too expensive.
A few months ago, she put in a bid for a four-bedroom house she describes as “worn” and “needing a lot of work” that was $20,000 over its $1.29 million asking price, only to be told there were six offers and that it sold for $125,000 over asking.
Tom Reiser, 65, a broker for oil and gas insurance for upstream energy producers, says he decided to build in the Heights because it has a higher elevation than other parts of the city—and so less of a propensity to flood. “I’m not a risk taker,” he says. In addition, he liked that the Heights is a shorter commute to downtown.
He bought a 6,500-square-foot lot for $600,000 and spent $1.1 million building his 4,875-square-foot, four bedroom, 4½-bathroom house, finished in December.
The recovery of other areas of the city is just as complicated. Houston’s map looks like a spider web. An inner loop is ringed by Highway 610, and around it is another loop, defined by the Beltway. For people who work downtown, the most desirous high-end neighborhoods are in the Inner Loop.
No Inner Loop neighborhood was immune to Harvey’s destruction, but the storm’s impact varied greatly, depending in part on how close streets were to a bayou—the waterways that run through the city. These bayous, which affect what areas are considered part of the floodplains, were hurt by two other events: the Tax Day 2016 flood and the Memorial Day 2015 flood, both of which reached what are called 500-year-storm levels.
River Oaks—an old-money area with its own private security force, where large stone and brick mansions line wide streets—was a prime spot for media images of wealthy residents and their pets being rescued by boat in Harvey’s aftermath. In reality, only the streets along the area’s Buffalo Bayou—known as Billionaire’s Row—along with the country club’s golf course, flooded. The rest of the neighborhood didn’t.
The median sales price of homes in River Oaks has shot up 22.6% year-to-date compared with a year earlier. For some residents, such as plastic surgeon Forrest Roth, there is no other luxury neighborhood in Houston. “Nothing else comes close,” he says. Dr. Roth has put his house on the market for $3.749 million because he is looking to downsize, but says he plans to stay in the area.
Kathleen and David Hochberg never really considered buying in Bellaire because of the flooding, among other reasons. They chose River Oaks, where they bought a 5,000-square-foot house on a 10,000-square-foot lot for double the amount they’d intended to spend. Even so, the couple felt the effect of the storm when they tried to hire contractors, who are in high demand, to help with renovations such as painting and putting in new floors, cabinets and sinks.
“It took much longer and was way more expensive than it should have been,” says Mrs. Hochberg. In the end they spent an additional $200,000, and Mr. Hochberg did the outlets himself to avoid a $20,000 electrician fee.
Phil Pyle, president of Enerflex’s International Business, and his wife, Lucia Cheng, bought a newly built, 5,100-square-foot, four-bedroom, four-bathroom contemporary house with iron and glass doors, soaring ceilings and reclaimed beams for $2.65 million in April. They found a section of an Inner Loop neighborhood called West University that didn’t have flooding. They had studied Houston’s floodplain maps from their high rise in Abu Dhabi in the United Arab Emirates. “You’d have to be crazy not to do that,” says Mr. Pyle. The couple plan to live in the home for 10 years and “want to enjoy peace of mind from flood risk.”
Some Houston housing experts say the Harvey effect won’t last long, and that neighborhoods like Bellaire that might be down now are where opportunity lies. There is skepticism that climate change will lead to another event of Harvey’s magnitude anytime soon.
“People forget,” says Chris Kelso, a branch manager with HomeTown Lenders, who has already noticed clients ignoring the section of closing statements that address a property’s risk of flooding. “In the end, people will live where they want to live.”