Housing markets in hurricane prone areas may falter.

Housing markets may falter in areas that experience increased successive hurricanes over a short period of time, according to the October 2001 issue of The Appraisal Journal, the professional journal of the appraisal industry. The article, "Hurricanes, Housing Market Activity and Coastal Real Estate," by J. Edward Graham Jr. and William W. Hall Jr., focuses on ways to examine real estate values following such natural disasters. In the article the authors look at various hurricanes that have vastly affected areas in the United States, specifically along the Atlantic Coast, and the adverse effects they have had in relation to housing prices.

Homebuyers don't normally make adjustments in their willingness to buy, or sellers price expectations, based on the results of one or two hurricane strikes, say the authors.

However, an increased frequency of strikes in an area does seem to have an impact on housing transactions during the following months. Homebuyers and sellers are hence responding to their perception of increasing environmental risk factors in these areas.

"Assuming hurricane landfalls are random events for a given coastal community, a single storm or even a pair of storms should have no appreciable effects on property value," the authors note. "However, we hold that the increased frequency of strikes in our study area does not favor housing prices. We believe that housing market participants in that region may no longer view the landfalls as random, and consequently, home prices may fall."

Based on the softening real estate market in areas hit by recurrent hurricanes, Graham and Hall developed a standard pricing model to determine if there was, in fact, a relationship between these hurricanes and the market, and if so to what degree. The study concluded there is a significant relationship between repeated hurricanes and the home market, such that after these occurrences the market became weakened. However, the study does not draw the conclusion that market falters solely because of the hurricanes.

Also featured in the October 2001 issue of The Appraisal Journal is an article "Misconceptions associated With Low Income Housing Tax Credit (LIHTC) Valuations," by Ronnie J. Hawkins, MAI, SRA. This article attempts to clarify many of the misconceptions associated with the Low Income Housing Tax Credit program. Challenges associated with the LIHTC project are discussed and related to the Uniform Standards of Professional Appraisal Practice (USPAP).

The new International Appraising section of the issue features two interesting and informative articles: "Birth of a Profession," by George Badescu, and "The Significance of Social Influences and Established Housing Values," by Richard Reed, AAPI. "Birth of a Profession" discusses the evolution of professional valuation in Romania, and "The Significance of Social Influences and Established Housing Values" focuses on a study analyzing changes in the value of established residential house prices in Brisbane, Australia.

The Appraisal Journal, published quarterly by the Appraisal Institute, serves as a forum for advancing appraisal theories and practices. Containing articles, columns and letters written by experienced appraisers and educators, The Appraisal Journal presents ideas, concepts and analytical techniques to be considered. Each issue offers alternative valuation methods for serious thinkers seeking creative solutions to appraisal problems, appealing to appraisers, educators and other real estate professionals.