Do Investors Flood Housing Markets After Natural Disasters? 

More than 180 natural disasters have impacted Texas since 1980, and the combination of economic growth patterns and climate change is projected to expose a growing share of the state’s population to these traumatic events, according to the Office of the Texas State Climatologist at Texas A&M University.  

While Texas’ major housing markets have been resilient after recent catastrophes, the recovery process often coincides with concerns of disaster investors rushing to purchase distressed properties, threatening to exploit vulnerable homeowners and overhaul local communities. For example, the Wall Street Journal published “Big Storms and Fires Clear Path for Disaster Investors” in 2019, narrating these concerns alongside a graph of single-family sales that includes Houston several months before and after Hurricane Harvey.

Concerns of disaster-induced investor acquisitions of single-family property may center around the concept of house-flipping. House-flipping commonly involves the purchase, renovation, and resale of a property within a 12-month period. Despite increasing liquidity and (potentially) efficiency in the housing market, house-flipping carries a negative connotation in many impacted neighborhoods. The framing of desperate homeowners forced to sell damaged property at depressed prices ignores the importance that housing liquidity offers to households suffering from wealth shocks.

In addition to the economic role and rationale of house-flipping in distressed property markets, there is little empirical evidence that investor acquisitions increase after natural disasters. The figure below reveals no systematic increase of investor purchases in Houston relative to the rest of Texas following major flooding events. While there was an uptick in single-family acquisitions by investors after Hurricane Harvey, this pattern did not emerge until almost six months after the storm, and much of the increase dissipated the following month. The story of distressed sales would be stronger if they occurred in the immediate aftermath of disasters before the bulk of insurance payments and recovery aid kicked in.

The prevalence of natural disasters in Texas requires a comprehensive understanding of how local housing markets respond and recover. These details provide critical information to homeowners, prospective buyers, and other market agents. While widespread property damage shocks local communities and injects chaos across a variety of dimensions, the threats of investors flooding the housing market are anecdotal.