New Jersey – Recovery & Setting Stage For Bigger Disaster
“Back to the Jersey Shore” is an excellent article in New York Times yesterday by Ronda Kaysen. A year and a half after the disaster of Hurricane Sandy that devastated thousands of homes, communities are rapidly rebuilding, looking ahead to a good summer at the beach. Just to summarize and paraphrase some of her very good observations that I will show in italics and then add a few of my own in bold:
Property prices are now estimated to be 34% lower than before the storm, recognizing that the communities are damaged and likely vulnerable to a recurrence some time in the future. That has allowed people to get into the market who previously could not afford it.
That huge one third drop in property values even a year after the storm gives a sense of what lies ahead. I should note that prices will likely rise somewhat further as the prized summer season approaches. In succeeding years, as the bad memory fades, prices will likely rise a little higher, though perhaps not recovering to pre-storm values. That seems to be the pattern. Over time, we forget the lessons of the past. In many situations that resiliency operates to our advantage, creating optimism. In the case of storm surge, extreme tides, and rising sea level however, rebuilding in the same location, investing in even more valuable assets may be short-sighted and foolish.
Many are building houses that are higher and a little more resilient, in some cases by building at higher elevation above sea level — a smart thing to do, but considerably more expensive.
Overall the recovery from the storm has upgraded communities with larger, much more expensive houses.
Beautiful beaches and the seductive surf and sea will always invite us to come closer. When the weather is fair and summer is in bloom it is a temptation hard to resist.
Many who owned homes pre-Sandy, have decided not to rebuild in the area and have sold, either due to increased costs for insurance, or concern about “when the next one will hit.”
The distortion that we do not see is the federally subsidized coastal flood insurance (“NFIP”) . It encourages building in harm’s way. The 2012 legislation (Biggert Waters) to remove the subsidies was recently rolled back by Congress due to public pressure. (Much has been written about that folly, e.g. The Wall Street Journal editorial on March 4, “Flood Warning for the GOP”.)
The encouragement of below market flood insurance is then reinforced by the message that the federal government will step in after monster losses and subsidize rebuilding or compensation for loss through FEMA, as we did compassionately following Sandy, Katrina, etc.
The lure of the shore is natural and calls to our emotions. One can easily imagine the human saga of the Jersey shore as a good movie with a great ending that will likely fade into a beautiful sunset by Labor Day this year, and even better ones in successive years. That would be ‘the happy ending’ version of this story.
One can easily imagine a different ending, or perhaps a sequel movie, this one an epic disaster, as slowly rising sea level prepares the foundation for greater mayhem and much larger write offs — paid for by the general public. That feature would show the next extraordinary storm, wrecking far greater damage, with higher waves, reaching farther inland, building on a base of higher ocean. It is now almost guaranteed, essentially ‘in the pipeline’ due to the melting ice and the slowly rising ocean that is already much warmer and getting more so each year.
With storms, we can hope we are simply lucky — that another one does not hit the Jersey shore during the half century or so of useful life of a new house.
Even with that luck we are going to get rising sea level as the ocean rises due to warmer temperatures melting the glaciers and great ice sheets on Greenland and Antarctica. Fortunately that is a relatively slow process. We might get to enjoy a good number of summers before its effect is noticed.
Hope you have a good summer…