September 16, 2008
Elaine Meinel Supkis
Hurricane Ike pretty much destroyed or rendered uninhabitable, most of the single housing units in Galveston and other barrier island communities. Time to estimate the losses and this will all impact on the housing crisis because I believe that much of the housing here will be abandoned except if the US government pays people to rebuild. But the US government can't afford to constantly rebuild houses damaged by hurricanes. And insurers like AIG won't do this, either. They can't afford to do this. Or rather, the realistic insurance premiums would be much too high for homeowners.
Here are some videos of the damage:
One of the communities that was totally wiped out, literally, was Port Bolivar. This community was on the more destructive side of the hurricane's surge and had no seawall to break the waves up. Helicopters flying over this region see only the cement pads of most of the homes that used to stand there. Anyone sheltering in these missing homes probably didn't survive. But there are no bodies since they were swept to sea.
I do hope everyone evacuated. This should be a warning to anyone tempted to ride out even a category 2 hurricane if they are living on the edge of the sea.
CNN) -- As Galveston's leaders on Monday repeatedly urged its residents to stay away, people who never left tried to make the best of their muggy, tree-strewn, powerless city.
City manager Steve LeBlanc said people like Reid who remain in Galveston should leave. There's not enough clean drinking water to serve the needs of the 15,000 to 20,000 people who stayed on the island, he said Monday, and there would be a "downward spiral if everybody started coming back."
The city's resources are "stretched to the max," and it could be a month before electricity is restored. The clean-up will be massive, he said, and the city is "unsafe."
North of Galveston, Texas Gov. Rick Perry urged residents who evacuated Houston, the nation's fourth-largest city, not to hurry back to their homes.
The displaced population is now homeless. After hurricane Katrina, it should be obvious that the state governments must shelter large numbers of people for long periods of time after hurricanes. Of course, limiting population growth on vulnerable shorelines is the best option. But people are drawn to these areas and these zones are very popular destinations. Living in these places weakens the natural forces that regenerate these barrier islands.
Developments on barrier islands should be eliminated or tremendously reduced. But this is very unpopular so it won't be done. People living in these zones don't prepare for hurricanes by setting aside emergency funds. Politicians have grown accustomed to having Uncle Sam do this for them. While they let rampant housing development to mushroom in these same, vulnerable regions.
Despite images of mass destruction along Galveston’s coast, many of the city’s historic structures and the new high rises overlooking the Gulf of Mexico survived the onslaught of Hurricane Ike, residents and real estate developers said Sunday.
While no one was downplaying devastation on the 30-mile-long island, treasured historic sites in Galveston’s Strand area, which survived the huge hurricane of 1900, are still standing, as are the new high rises that have sprouted along the coast in a recent $6 billion real estate boom.
Dwayne Jones, executive director of the Galveston Historical Foundation, said Sunday that most of the damage to the island’s oldest structures occurred north of Broadway, facing the bay. “There is significant wind and flood damage to many of the buildings in that area,” he said. Jones has evacuated to Austin and was speaking from the Preservation Texas offices, but said he has been in contact with people in Galveston.
So the solution is to park high rises right on the edge of barrier islands that are being undermined by a rising ocean? Talk about insane!
I know from news reports that emergency crews and TV reporters were terrified during the category 2 storm due to the high winds and the surging seas. Some of these high rises took significant damage! If this were a category 5 storm, these high rises may have survived but would be like the ones in Cancun 10 years ago when a category 4 storm left ships stuck inside of the third story of these hotels and all the windows were blown out. Weathering and surviving a mere category 2 hurricane is no advertisement of strength.
The added blow of this storm has worsened the housing crisis. Perhaps, significantly. I went poking about the web, trying to see how much money has been lost. I found a page with data that is 8 years out of date.
So, at the very beginning of the housing bubble, half of the homes in Galveston had mortgages and only 6% had second mortgages. We know that the frenzy of lending from 2001-2002-2006 put many, many homes into hock. Second mortgages proliferated. I would think that the statistics today would be much closer to 80% of the homes there are deep in debt. To discover what the real estate market was like before the storm, I looked up houses for sale there.
Port Bolivar, Texas 77650
This is a Operating Vacation Rental located on the Bolivar Peninsula with spectacular views of the Gulf, the Marsh, the North Jetty, the Galveston/Houston Ship Channel and Galveston Island. 1 1/2 miles from the Ferry Landing across from Galveston just 3 miles across bay and 10 miles down the road to Crystal Beach. For pictures and more info go to www.c-covington.com The home has 1600 sq.ft of living space, fully furnished. Living room (19’x21’);Dining room (8.3’x11’); Kitchen (11’x11.6’); Decorated in Bamboo, Large deck on front of home also enclosed sun porch (8.3'x17.6')has 9 windows overlooking Bolivar Roads, where the ships lie in wait to await passage to Galveston or Houston docks. It has 4 Bedrooms - 2 Baths - 1st Bdrm (13.6'x15.7')Canopy King (Oriental theme); 2nd Bdrm (10.8'x11.10') King (Jungle rm); 3rd Bdrm(11.6'x16.4') 2 Dbl/Twn Bunk (Children's rm); 4th Bdrm (9.2'x11.6') Queen. Sunporch Trundle bed Amenities: Central Air/Heat, Satelite TV, TV/VCR & Multi-game table (pool, soccer, basketball, etc.) in children's room, Linens included, DVD player, Library of VCR tapes both children and adult, Poker Table/w chips; numerous games/puzzles/toys, highchair, Portable playpen and crib. Carpet, Fully equiped Kitchen, Blender/Food Processor, Coffee Pot, Toaster, Popcorn Microwave, Dishwasher, Microwave, Ceiling Fan in each room, Shower downstairs, Bicycles, Fish Cleaning Table w/hot & cold water, Gas BBQ Pit, Swing, and built-in picnic table. Deck furniture. Fully concrete under house with parking for 2 cars also enclosed work area with washer, dryer, and shower.
Here is the satellite image of where this house used to stand, taken before the storm:
In the videos at the top, one of them shows Port Bolivar and it is the helicopter video showing virtually no houses left standing at all. This house no longer exists. It was an investment property going for over a quarter million dollars. If we multiply this amount with the number of houses that vanished during the storm, this would probably exceed $500,000,000. That is, five hundred million dollars. Port Bolivar was a very small community. There are many tranches floating around the planet that expect the owners of these now-totally destroyed buildings, expecting someone to keep on paying down the mortgages! And this won't happen. These segments of tranches are now dead meat.
It gets worse.
Buy this single family home for sale by owner. This fabulous house is equipped with four bedrooms, four baths and a vast garage. Inside you will love Waterfront, Fireplace, Patio, Boating, Alarm, Gas Range, Central AC, Marble Floors, Wheelchair Accessible, Carpet. School district: Galveston i.s.d.. At this price this home will sell quickly! Price: $949,500
A MILLION DOLLAR HOME had its open house literally while the hurricane's waves were already battering the barrier island! I am betting, since this was put on the market in a 'self-selling' mode, the owners were desperate to be their own brokers since they couldn't afford to sell it via a broker due to the fees eating up what little profit there was to be had. Now, these people have no home to sell, not at a million bucks. Let's say, just 1,000 homes in this area were million dollar babies. This is a billion dollars in losses!
The housing bubble endangered US finances since these very expensive homes are uninsurable in any realistic way. Any mega-natural event will wipe out any insurers which is why insurers are in terrible trouble and the cost of insuring a house in geologically and weather-hazard regions have climbed beyond most homeowner's abilities to pay. The US government should not be in the business of insuring hyper-expensive housing. Banks should NEVER be extending mortgages to buildings in very inappropriate, dangerous or stupid places!
Instead, the opposite has happened: the entire US banking and government systems are now in danger of collapse or are collapsing because people were given vast sums of money to build in very stupid places. And any inevitable natural event ends up hammering the entire financial systems of our nation! I don't think it is very wise for a nation to put itself into bankruptcy trying to coddle people who want to live in extremely hazardous zones, in extremely overprices houses! If they want to play this game, they can do it on their own dime.
I built my own home, myself. It has no mortgage on it. It is quite possible for people to do what I did. But people want to tap into the reasonable system for building and buying homes but doing this in places where we know, statistically, the houses have a high chance of being totally wiped out every 50 years or less! I rebuilt houses that were up to 200 years old. These were built in safe regions with few hazards. But the houses that withstood all the hurricanes of the last 100 years in Texas were Victorian buildings on very specific sites that were built with materials few can afford today. How many people can afford to build stone houses that have walls 2' thick?
Virtually no one. And the internal damage of even these stout structures is still very expensive. When people built houses in 1860, they had no electricity, no insulation and little plumbing. Today, houses are extremely vulnerable to water damage thanks to modern building materials and systems.
Don't miss this move in well cared single family home with three beautiful bedrooms and two perfect baths. This would be a great home for a family. Price: $339,000
Click on Street View to see how flat and desolate the area was before the hurricane smashed everything.
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The average price of housing in Galveston before the bubble was around $130,000. It looks to me that the price average before this hurricane wrecked most of the housing was at around $275,000. If there were 20,000 homes destroyed in this sector and that is the average price, the cost to our government, to pay off the mortgages or rebuild these useless homes would be....$5 billion.
In other words, the cost of one month in Afghanistan and Iraq. We can't be spending this money doing very stupid and futile things in these distant lands while passively watching our entire financial infrastructure collapse here at home. We are treating our nation as if it were a barrier island and we are now drowning like rats, in red ink.
The US has to make choices. And one of these is to cease and desist in our imperial overspending. We just cannot afford this. Saving the people of Texas is more important than ruling Muslims who hate our guts. We are losing the war against nature here at home as well as the war for hearts and minds in the Middle East. Note how the media doesn't connect these events. When talking about the stock market crash, they don't mention the hyper-expensive wars. But Mother Nature will teach us sharp lessons in economic matters as well as the potent powers she possesses.