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# Disasters do not destroy the U.S. housing market
- URL: https://www.smdp.com/disasters-do-not-destroy-the-u-s-housing-market/
- Published: 2005-09-07T15:00:00.000Z
- Updated: 2026-10-25T00:56:17.000Z
- Author: Guest Author
- Tags: Opinion, Downtown, #archive-import

*By JODI SUMMERS*

Disasters have little long-term affect on the housing market. After 9/11, prices in downtown Manhattan dipped for about three months. After the Northridge Earthquake, the local economy continued its downward cycle through the late ’90s, but here it is 11-plus years after the earthquake and local home prices have seen more than a 500 percent increase.

Hurricane Katrina partially submerged 80 percent of New Orleans. The National Association of Home Builders noted that a “large share” of the more than 200,000 homes in New Orleans were likely to be destroyed — “made uninhabitable and beyond economically justified repair.”

FYI: Hurricane Andrew in 1992 destroyed an estimated 28,000 housing units, and the 1906 San Francisco earthquake and fire reportedly destroyed about 28,000 buildings. Overall, the floods did not tear off roofs or walls or cause structures to collapse, but many homes will be permanently uninhabitable because of floodwaters carrying contaminants that cannot easily be removed, and prolonged submersion would cause structures to be damaged beyond repair, observed the Association of Home Builders report.

Homeland Security Secretary Michael Chertoff said that the entire city would have to be evacuated. “We are not going to be able to have people sitting in houses in the city of New Orleans for weeks and months while we de-water and clean this city,” Chertoff declared after arriving in Louisiana.

Damage from Hurricane Katrina is estimated to be more than $25 billion in damage in Louisiana, Alabama and Mississippi.

“The housing market will bounce back,” said Grant Thrall, a University of Florida professor specializing in the effect of calamities on real estate values. “We have found from environmental hazards in general that the market has a very short-term memory.”

Florida had four major hurricanes in 2004 — and still ended the year with a 22 percent increase in sale prices.

“We know from previous studies that 10 percent of the people who evacuated will not return. So we have a decrease in demand in the short run,” Thrall noted.

As with Florida in 2004 — before the storms — Louisiana, Alabama and Mississippi were experiencing record home sales before Katrina hit. In New Orleans, the median home price in the second quarter of 2005 was $152,600 — an 11-percent increase over the prior year.

Casualty loss tax deductions will help individuals pay for part of their losses through income tax savings. According to real estate expert, Bob Bruss, the I.R.S. defines a tax-deductible casualty loss as an uninsured “sudden, unusual or unexpected” loss event.

In Southern California, that most often means damage caused by fire, earthquake, mudslide, theft, accident, water damage, riot, embezzlement, vandalism or rain — anywhere that has been declared a “disaster area.”

Affected taxpayers who suffer casualty losses can claim their uninsured deductions either in the tax year the loss occurred, or in the previous tax year by amending their prior year tax returns. The taxpayer then either receives a prior-year tax refund, or a current-year tax savings.

Check with your accountant, all of your casualty loss may not deductible. As Bruss points out, “Only personal casualty losses that exceed 10 percent of the taxpayer’s annual adjusted gross income (line 37 of your 2004 federal tax return), minus a $100 non-deductible ‘floor’ per event are deductible.”

To illustrate, suppose your garage caught fire and cost $15,000 to repair. Homeowner’s insurance covered $5,000 of the repair, leaving you with a $10,000 out-of-pocket loss. Suppose your adjusted gross income is $60,000\. Subtracting 10 percent or $6,000, minus the $100 floor per event, means your $10,000 loss results in a $3,900 deductible casualty loss. This amount varies according to your adjusted gross income. To calculate your casualty loss deduction, use IRS Form 4684 and attach it to your federal income tax return.

If your loss occurred slowly, over several months or years, it probably is not a deductible casualty loss. F.Y.I. — the IRS likes to audit causality loss claims.

Keep proof of loss and repair. Photos, bills and receipts are good evidence to support a casualty loss deduction.

Don’t forget to include indirect expenses that were not covered by your insurer — these costs might include temporary housing, moving expenses and property protection, such as board-up and legal expenses.

Keep in mind if the casualty loss occurred to an investment property or business, the full, uninsured casualty loss is deductible regardless of amount as a business expense on your income tax Schedule C or E.

For the record, Louisiana, Alabama and Mississippi had record sales in 2004 and housing prices for 2005 were escalating at a record pace before the storms hit. Those in the know feel confident that these markets will rebound.

“You have very strong market fundamentals in these states,” said Walter Molony, spokesman for the National Association of Realtors. “You have a very strong coastal draw and strong second-home market in coastal areas. You have people retiring to those areas.”

“We know from studies on how people respond to hazards that if a hazard occurs three times within seven years, the market will internalize that and respond,” Thrall said. The last time a hurricane hit Louisiana was Hurricane Camille in 1969, which was 36 years ago, Thrall said.

“On that rate, we have three a century. People don’t internalize to hazards that occur with a frequency of three a century,” Thrall said, meaning that something happening so seldom won’t affect the real estate market. (Jodi Summers is director of the investment division at Boardwalk Realty Santa Monica. Contact her at or 310-309-4219.)

*Originally published in the Santa Monica Daily Press print edition on September 7, 2005.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/090705.pdf?ref=smdp.com)