WSJ Your Money Briefing - The Long-Term Financial Burden of Hurricane Recovery

Episode Date: October 10, 2024

Property owners in the path of hurricanes often face years of debt and lower credit scores as they rebuild. Wall Street Journal personal finance reporter Katherine Hamilton joins host J.R. Whalen to discuss the experience of homeowners who have endured several major storms. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

This podcast is brought to you by Wisdom Tree Portfolio Solutions. Elevate your portfolio management with our bespoke strategies, comprehensive reviews, and in-depth collaboration. Our services help you streamline operations, allowing you to dedicate more time to grow your practice. Visit wisdomtree.com backslash portfolio solutions for details. Here's your money briefing for Thursday, October 10th. I'm JR Whalen for the Wall Street Journal.

Yesterday we discussed how some homeowners in the path of hurricanes are left with a sizable bill, as insurance companies have tightened the terms of policies. That often compounds the financial pain as they clean up and rebuild. A lot of people have to actually leave their job for some time, which can cause people to fall behind on expenses. And then obviously any damage to your belongings and your house can take a huge toll. And the research shows that debt climbs for a lot of survivors of disasters. Savings tends to go down and credit scores also can go down. The research shows that debt climbs for a lot of survivors of disasters, savings tends to go down, and credit scores also can go down.

Wall Street Journal personal finance reporter Catherine Hamilton will join us after the break. AI may be the most important new computer technology ever, but AI needs a lot of processing speed and that gets expensive fast. Upgrade to the next generation of the cloud, Oracle Cloud Infrastructure or OCI. OCI is the single platform for your infrastructure, database, application development, and AI needs. Do more and spend less like Uber, 8x8, and Databricks Mosaic. Take a free test drive of OCI at oracle.com slash Wall Street, oracle.com slash Wall Street.

For many homeowners, the financial hardship caused by a hurricane can extend for years after the storm has passed. Wall Street Journal personal finance reporter Katherine Hamilton joins me. Katherine, what are the latest estimates on the amount of property damage caused by Hurricane Helene? Right now, Moody's Analytics is estimating that the costs could be as high as $34 billion, but that could change as things continue to progress. How does the onset of powerful storms like Helene

often disrupt people's finances? They can devastate finances in a few different ways and it's a really big shock to the system for a lot of folks. A lot of people have to actually leave their job for some time, which can cause people to fall behind on expenses. And then obviously any damage to your belongings and your house can take a huge toll. And the

research shows that debt climbs for a lot of survivors of disasters, savings tends to go down and credit scores also can go down. What do people often experience in terms of what their insurance covers and what it doesn't? It really varies depending on the situation. I've heard from some people that if they have damage from both wind and flooding, for example, sometimes the flooding insurance will blame the wind and the wind insurance will blame the flooding, so that can limit how much coverage you get from those. But it's also a bigger issue for Helene specifically because a lot of the houses in Helene's path were not insured for

flooding because it was more inland than a lot of people were expecting and it's not a high flood risk area, so flood insurance isn't required in those areas. You mentioned people going into debt a moment ago. How does that factor into the lingering effects on people's lives and their finances after a storm has passed? It can have really long-term effects. One of the major effects is declining credit scores. So on average, credit scores fell about 46 points

following disasters one study found. And debt also actually compounds in many cases. So there was one paper by the Urban Institute that showed that the amount of people with debt in collections in areas where there were disasters actually continued to increase four years after the disaster. You and your colleague, Veronica Daggers,

spoke to a man from Florida who dealt with Hurricane Ian two years ago. What was his experience? So we spoke to somebody named Jason Johnson. He is from Fort Myers Beach, Florida. He experienced Ian two years ago and is also now experiencing flooding from Helene, which he and his wife had to take on

about $70,000 of extra expenses from that flooding. But two years ago, his house also severely flooded and they had to tap into their savings and took about $200,000 out of their savings, which has put a damper on their retirement plans. Is there anything people can do to prepare for these types of events that would soften the blow on their finances? I did speak to one woman who lives in Texas

and has experienced a lot of storms throughout her lifetime. And she was talking about how difficult it can be to prepare, especially when you're living paycheck to paycheck, because buying all the stuff that you need, insurance, generators, gas, it's obviously another additional expense that not everybody can really take on. Where in Texas does she live and when did the storm come through the area where she lives? She lives around Houston and the storm touched down there in early July. She's in Houston? Has she dealt with more storms than just that?

Yes, she said she has experienced somewhere around eight storms. Oh my goodness eight storms yes, the most recent one was hurricane barrel over this past summer and that storm caused eight trees to fall on her property, so Samantha was talking to me and honestly just sounded really defeated about her experience and her situation because every time a storm comes through, it uproots her life. In this particular case, she was without internet for over a month, which put a huge damper on her ability to do her job, which she works remotely and relies on her overtime hours to meet all of her bill payments.

So she's fallen really behind on her bill payments and has taken on an additional $8,000 in debt from just this storm. That's a lot to go through. What did she talk about in preparing for the next storm? She really feels like there's not much that she can do to prepare because she's lived through eight storms. She knows she needs generators, gas, things like that to be ready for a storm, but all of those things are expensive in and of themselves. And she said she really

feels like the aid from FEMA is not enough to cover the destruction from one storm and certainly not enough to be prepared for the next. Disaster recovery takes longer than a lot of people anticipate. For some, it can take up to five years to get back into their homes. In those cases, assistance can come too late or it can end too soon

before people are really fully recovered. That's something that people tend to overlook how long it takes to financially rebound from a disaster. That's WSJ reporter Catherine Hamilton and that's it for your money briefing. This episode was produced by Zoe Culkin with supervising producer Melanie Roy. I'm JR Whalen for the Wall Street Journal. Thanks for listening. This podcast is brought to you by CME Group, the world's leading derivatives marketplace, offering the widest range of global benchmark products across all major asset classes. CME Group, where risk meets opportunity.