Hurricane Sandy has the undesirable distinction of being one of the ten most expensive hurricanes in US history. In the days before Sandy impacted, it was forecast to be ‘large, slow-moving and no doubt very costly.’ While it wasn’t anything like as destructive as Katrina, which cost $125bn by some estimates, Sandy is expected to cost upwards of $50bn in damage and hundreds of thousands of homeowners are expected to file insurance claims for flood and wind damage, according to the Consumer Federation of America. Whole blocks of property were totally destroyed, the subway was knee-deep in water and even the New York Stock Exchange was in the dark, closed by the weather for two days running, for the first time ever.
The focal points of the damage done by Sandy are sadly apparent from photos and news reports that show rides from Rockaway Beach floating in the sea, beachfront housing levelled and Breezy Point, in Queens, tragically destroyed. Joe Sitt, who owns property across New York, said in an interview for Fox News that many of his properties in New York were severely damaged.
Some analysts think Sandy will act as a drag on the American housing market. Lawrence Yun, chief economist of the National Association of Realtors, is one of them: ‘this will definitely create a negative in the short term,’ he says. ‘The bottom line is we clearly anticipate a slowdown, but it will be temporary.’
Yun expects a regional drop along the East Coast, a ‘noticeable, measureable impact’ large enough to pull the national sales statistics down from November onward. Pending home sales will be delayed or in some cases collapse altogether, sellers will take damaged properties off the market and buyers will hold off making purchases.
The immediate effects on the wider economy involved the Nasdaq index falling by 0.58% and the Dow Jones losing 32.72 points during Wall Street’s closure, and there is to be some support for those whose homes have been damaged. Two of the country’s biggest mortgage lenders €“ both bought out by the government in 2008 have pledged to offer help to those borrowers who live in designated disaster areas. Freddie Mac and Fannie Mae said they ‘strongly encouraged’ servicers to help affected borrowers with Freddie Mac-owned homes by suspending foreclosure and eviction proceedings, as well as late fees, for up to 12 months. The mortgage giants also asked their servicers not to report forbearance or delinquency caused by the disaster.
While some experts propose a downturn in the housing market as a result of Sandy, others point up the economic effects of the inevitable rebuilding program. As Chris Christie told journalists that ‘we’ll rebuild it – no doubt in my mind,’ contracts for lumber futures on the Chicago Mercantile Exchange rose to their highest permitted level, and remained there for the rest of the day as investors sought to capitalise on the upcoming spike in demand for building materials.
However, the boost for the construction industry is only forecast: the property damage and weakening of infrastructure is here already, and consumer spending is lowered and likely to remain so. As Stephen East, an analyst with International Strategy and Investment Group in Saint Charles, Missouri, remarks, ‘it will take prospects in the region a couple of weeks for home purchases to return to the forefront of buyers’ minds.’
The boom for construction might have an unexpected benefactor though; the state government, responding to descriptions of the event as a ‘wake-up call,’ is considering building flood defences or levees, bringing federal money into the state construction sector to the tune of $29bn.