As the death toll from Hurricane Florence reaches 38, and flooding continues in Wilmington and other coastal and inland North Carolina communities, how much will the rebuilding cost, and how will it affect the state’s construction economy?
Moody’s Analytics estimates damages could reach $17 and $22 billion – and could go higher. Much of the money will ultimately flow to contractors and builders, especially in the residential sector, though the exact impact on the construction industry is still uncertain.
“We were close to $10 (billion) on Friday (Sept. 14), CNBC quoted Moody’s Analytics chief economist Mark Zandi as saying. “The flooding is more extensive than we had anticipated and the storm was slow moving. It hung over the Carolinas a lot more than was expected.”
Moody’s says Florence is among the 10 costliest hurricanes ever recorded.
While the storm wasn’t extremely strong in wind strength, coming ashore as a Category 1, its rainfall set a record, surpassing Hurricane Floyd in 1999.
“These estimates are based on the information available, and there is a high probability that Florence’s costs will be revised significantly higher with added information on inland flooding,” Moody’s says.
The damage is unlikely to impact large home builders, with home buying activity simply being pushed further into the future, not stopped altogether.
“After three to six weeks of sales disruption due to clean up and electricity and infrastructure restoration, sales should return to positive year-over-year levels by year end,” JMP Securities analyst Peter Martin wrote in a research note. “Given enhanced building codes for new homes, we expect most damage to occur to legacy existing homes, which should create improved long-term demand for housing.”
Martin said that is what happened last year after Hurricanes Harvey and Irma in Texas and Florida. The damage caused some concerns in the resale market, as potential buyers feared hurricane damage.
“I expect builders to say, we’re going to have some cleanup expenses,” Martin said in a published interview. “A couple of houses are damaged, but we’ll defer closings.”
Building materials prices may rise, in part because of increased demand, supply disruptions, and (only indirectly related to the hurricane), President Trump’s tariffs on imported products, including Canadian softwood lumber.
As an example, Louisiana-Pacific Corporation said that its engineered wood operations in Wilmington have been temporarily shot down, which suffered some damage during the storm.
LP says 149 employees work at the Wilmington plant, among 700 people at three locations in the state. The company’s operations in Roaring River and Roxboro were not impacted by the storm.
“Our thoughts and prayers are with those impacted by this storm, especially our employees,” LP CEO Brad Southern said in a statement.
“We are thankful that as far as we know, none of our employees have been injured during the storm and subsequent flooding over the past few days, however many have damaged homes and some have been displaced by the flooding,” he said.
While the storm didn’t severely harm North Carolina’s biggest metropolitan centres of Charlotte and Raleigh/Durham, thousands of homeowners and many businesses experienced the extreme flooding in several communities.
As an example, the North Carolina Military Business Centre (NCMBC) reported that its coastal offices, including Wilmington, Jacksonville, Havelock an Moorehead City, had to close because of the flooding. As well, NCMBC’s inland offices in Fayetteville and Goldsboro were closed.
NCMBC says it isn’t certain yet of the status of the annual Southeast Region Federal Construction, Infrastructure and Environment Summit scheduled for Oct. 24 and 25 in Wilmington.
“The NCMBC staff has connected with staff members of the Wilmington Convention Center, on their well-being but not on the state of the convention center or the hotels, etc.,” NCMBC said in a release. “Once the Convention Center and hotels have the ability to access damages, within the next week, we will provide an update on the summit. “For now we are planning to move forward until told otherwise.”