Homeowners in non-flood-designated areas impacted by Hurricane Harvey are facing the reality of how important flood insurance is in today’s climate.

By Ron Feir, ABR, CRS, e-PRO 

With the recent hurricanes slamming the U.S., property owners were caught flat footed and unprepared for rebuilding costs. Worse, many properties damaged by flood waters were not located in designated flood areas, so were never required to possess flood insurance.

Homeowners insurance typically covers just damage from winds, not floods. For flooding, you need separate coverage from the federally run National Flood Insurance Program. This insurance must be bought by homeowners with federally backed mortgages living in the most vulnerable areas, called Special Flood Hazard Zones.

Let’s examine what these flood hazard areas are and what entity classifies these hazard areas.

Special Flood Hazard Area is an area identified by the United States  as an area with a special flood or mudflow, and/or flood related erosion hazard


The land area covered by the floodwaters of the base flood is the SFHA on NFIP maps. The SFHA is the area where the National Flood Insurance Program’s  floodplain management regulations must be enforced and where the mandatory purchase of flood insurance applies. The SFHA includes Zones A, AO, AH, A1-30, AE, A99, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, VO, V1-30, VE and V.

This may seem complicated, but you can consult with your insurance provider, town, city, or county/parish to determine if your property is in or near an SFHA.

How are we impacted by flooding?

Major floods not only cause direct damage to the affected areas, they also have a cascading effect due to many factors. Those include a decrease in property values in the affected areas; disruption of transportation systems, food and water supplies; energy processing and distribution; and other economic damage to agriculture and local business.

Were all the properties affected by Hurricane Harvey designated in the Special Flood Hazard Area?

No. One problem with the maps highlighted by Tropical Storm Harvey: They don’t take into account the risk of flooding from overcapacity drainage sewers and ditches or from water flowing toward a sewer or bayou. More than half of the flooding in Harris County, Texas, over the years has been due to such problems, according to the Harris County Flood Control District.

Better safe than sorry?

“Nobody’s buying flood insurance outside the federal flood risk areas, particularly where we’re talking about storm water flooding,” said Carolyn Kousky, an expert in natural disaster insurance at the University of Pennsylvania’s Wharton School. She said even people who figure they should have insurance just to be safe usually put it off and never get around to buying it.

What about flooding effect on community interest and property values?

Redfin.com is seeing a surge in buyer interest post-storm. Even in neighborhoods with a lot of damage, the homes that didn’t flood are in high demand. A Redfin agent in central Houston wrote three offers for undamaged properties right after Labor Day.

Even those that flooded probably will not have a problem selling, as many people already are speculating on the market recovery. The volume of calls Redfin is receiving from cash investors looking for homes to buy at a discount has quadrupled since the storm.

The long-term recovery consensus reflects the opinion found in an article published by Ebbwater.ca (Posted on July 2, 2014 by admin in Flood HazardFlood MappingPet Projects). However, actual flood occurrence shows  negative impacts on the property value in almost all cases.

The size of the impact depends on the degree of flooding and ranges from an average of -15% up to -60% for severe property damage. Often, nearby property that is not affected by the flood also decreases in value. In some cases, the improvements and renovations made after a flood occurrence have increased property value.

Recovery time to pre-flood value (or non-significant difference between flooded and non-flooded property) also depended on severity of flooding event, as well as a number of external factors. That time ranges from 6 months to more than 10 years for severe floods, with most studies showing about  3 to 4 years recovery time

What Houston residential appraisers have to say

Residential appraisers in the Houston area have a better handle on property values there, both before and after Hurricane Harvey’s wrath.

“Homes within areas with major flooding will likely experience some decline while those in non-flood areas will likely enjoy shorter marketing time and/or higher pricing,” said Joe Stanfield, Stanfield & Associates Appraisals, Houston.

Joe Standfield

Another Houston-area appraiser believes it’s really too early to tell just how flooding will affect valuation of homes in the affected areas.

“Based on previous flooding in the area there will be a short time when speculators will be buying what they can for 10% to 30% of pre-flood value,” said G.W. Cornelius of Cornelius Appraisals in Galveston, Texas.

“After that the market typically recovers slowly. However, after a 2-year period the market will be back to normal,” he said. “People in general have a short-term memory of flooding and other disasters, homes will be bought and sold in these areas as though the flood never happened.”

How will hurricanes change flood insurance concerns in flood-prone areas and beyond?

“It is my opinion that homes in the areas that suffer major flooding will experience some market resistance and therefore some decline,” Stanfield said. “It is typical when after any major event such as flooding, pipeline explosions or serious crime, the market responds negatively for some time period. The resistance period can last for 1 to 5 years depending on the convince of location and many other factors.”

Cornelius’ take: “For those of us that live in flood prone areas which is a large part of the population of the U.S.A., flooding is a major concern but no more so than concern for wildfire, earthquake, tornado or other natural disasters. Attention to flooding is a never-ending process and bigger and better prevention is being designed and put into place each day.

 What is the master plan to assist property owners recover?

On Aug. 30, FEMA’s director Brock Long told the Associated Press that storm victims who have lost their homes and are uninsured could seek assistance through the Small Business Administration, which offers loans. The source of the funding originated from the House of Representatives. The House approved the package of bills in a 316-90 vote in which FEMA and Community Development Block Grant program will each receive $7.4 billion of the $15.3 billion. The remaining $450 million will support the Small Business Administration’s disaster loan program.

 Ron Feir, ABR, CRS, e-PRO, GRI, MRP, RSPS, SFR, SRES, SRS, is a REALTOR® with Century 21 Gavish Real Estate (offices in Pahrump & Las Vegas) Pahrump, Nev.