Hurricane Harvey: Assessing the Damage

September 1st, 2017 by Trey Barrineau

It’s been almost a week since Hurricane Harvey made landfall along the Texas coast, and the preliminary damage estimates from the high winds and flooding rains indicate it could be one of the costliest storms in U.S. history for businesses and homeowners.

(Photo by NOAA/NASA GOES Project)

The Texas Division of Emergency Management estimates that more than 93,000 homes were destroyed or damaged by the storm, a number that’s certain to rise. Repairing or replacing those residences will almost certainly provide a short-term boost in demand for doors and windows.

On Friday, Anna Day Stafford, a legislative and external affairs liaison with the Texas Windstorm Insurance Association (TWIA), told DWM that her organization, which provides last-resort coverage in coastal areas most vulnerable to hurricanes, had received approximately 32,103 claims. The Texas FAIR Plan Association (TFPA), which TWIA also administers, has received 6,610. (The FAIR Plan Association is a state-mandated program that provides insurance to residential property owners who can’t get it otherwise.)

“Preliminary maps show claim concentrations in Rockport, Corpus Christi and the Houston/Galveston area,” she said. “However, at this time, we are unable to estimate the total number of claims that will be filed in relation to Hurricane Harvey.”

The CoStar Group Inc., which studies the commercial real estate market in the U.S., said Thursday that 27 percent of Houston’s multifamily residential, office, retail and industrial buildings could be flooded.  That’s about $55 billion in property value, CoStar says. The company adds that 72,000 apartment units sit within Houston’s 100-year floodplain and are likely inundated with water.

Total damages from Hurricane Harvey could exceed $190 billion, according to an estimate from AccuWeather.

Rebuilding Challenges Ahead

Looking ahead to reconstruction in the affected areas, the National Association of Home Builders (NAHB) says fairly priced building materials will be critical. The group urged U.S. Attorney General Jeff Sessions to closely monitor the effects of the catastrophe on the cost of essential building materials, particularly lumber, and to act swiftly and decisively to prevent exploitative pricing.

“A reliable supply of reasonably priced construction materials will be essential to getting people back into their homes in the areas affected by Hurricane Harvey and to maintaining housing affordability nationwide,” said Granger MacDonald, NAHB chair a home builder and developer from Kerrville, Texas. “The need for extensive rebuilding and repair in the areas affected by Hurricane Harvey is likely to affect the supply of building materials in markets around the country. We urge consumers nationwide to be aware of the potential for price gouging and to contact the U.S. Attorney General’s office if they believe that prices of building materials are being manipulated unfairly in their market.”

MacDonald also said the storm should push the U.S. and Canada to reach a softwood lumber trade agreement.

“In the aftermath of the devastating storm, demand for softwood lumber is expected to increase dramatically as home builders and remodelers repair and replace housing in Houston and across Texas,” he said. “This crisis makes it more important than ever that the United States quickly achieve a lasting trade agreement regarding U.S. imports of Canadian softwood lumber. We need a more permanent solution. That why we’re calling on Interior Secretary Ryan Zinke and Agriculture Secretary Sonny Purdue to work collaboratively to open more public lands for domestic timber production. This is the most straightforward way to diminish reliance on imported lumber and to meet demand as Texas and Louisiana look to rebuild.”

Who Will Do the Work?

Beyond the massive damage wrought by Harvey, Texas is grappling with an issue that’s plaguing the entire U.S. construction industry – a labor shortage.

“The homebuilders, remodelers and construction people are going to be busy for the next two years,” James Gaines, chief economist with the Real Estate Center at Texas A&M University, told the Dallas Morning News. “There was not very much extra capacity in the construction market, and now there will be higher strain to repair and replace what got damaged.”

That means construction firms in Texas might have to look south of the border for help.

“You can’t rebuild Houston without Mexican labor,” said Richard Fisher, the former president of the Federal Reserve Bank of Dallas, in an interview this week with The Wall Street Journal.

A Pew Research study from November 2016 showed that more than 25 percent of all Texas construction workers are undocumented. About 400,000 of the nearly 1.7 million illegal immigrants in the state work in the building trades.

Will Vinyl Prices Rise?

A possible challenge for the door and window industry will be crippled production capability for vinyl, which now represents about 70 percent of the U.S. residential window market, according to research from the American Architectural Manufacturers Association.

Kevin W. McCarthy, an analyst at Vertical Research Partners, an equities research firm, told Chemical & Engineering News that the Gulf region produces about 40 percent of the vinyl in the U.S., and about 60 percent of the country’s ethylene, polyethylene  and polypropylene. (Ethylene is an important component of vinyl production.) He said vinyl prices could rise in the coming weeks.

About  37 percent of U.S. capacity for manufacturing chlorine and caustic soda has been disrupted by Hurricane Harvey, according to Bloomberg Intelligence. Those chemicals  are also used to make vinyl and PVC.

One damaged plant is the Arkema chemical facility in Crosby, Texas, about 25 miles northwest of Houston, which was flooded and lost power over the weekend. That led to explosions, fires and a mass evacuation of residents near the plant. The facility makes organic peroxides that are used in the production of vinyl window profiles, among many other products.

On Friday, the U.S. Environmental Protection Agency (EPA) and the Texas Commission on Environmental Quality (TCEQ) released the following statement about the possibility of more fires at the Arkema facility:

“It is the understanding of personnel on the ground that the remaining eight trailers holding chemicals at Arkema’s facility are at risk of catching fire over the next few days. The refrigeration units have been compromised due to the massive flooding and therefore we expect these containers to catch fire similar to the way the first trailer did last night. First responders are outside the evacuation zone, but remain in the area, for quick response to ensure the safety of the community around the facility. After assessing the situation, local, state and federal response managers concluded that the safest course of action was to allow the remaining containers to catch fire, rather than try to send people to move them or put firefighters and first responders directly in harm’s way.  We continue to monitor smoke and air quality; the potential for additional fires in the area; and, have aerial assets ready to be deployed, as needed.  Everyone in the area should follow the safety instruction of local authorities, specifically staying out of the evacuation zone, avoiding smoke and flood waters.”

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