Construction is Weathering the Weather - PODCAST TRANSCRIPT

Editor's note: The following is the transcript of a live interview with Curtis McDonald of CoreLogics. You can read the interview below or listen to the podcast.

Intro: Hello and welcome to Contractor Outlook from The Coffee Shops. My name is Heidi Ellsworth, and this podcast is about bringing information from outside the industry, inside the industry and we're talking about the construction industry. So we talk to experts on a regular basis who are sharing things on the economy, on weather, on politics and today, so exciting, it's on weather. I am so happy to introduce and welcome Curtis McDonald from CoreLogics to Contractor Outlook. Welcome.

Curtis McDonald: Thank you. Thanks for having me. Looking forward to the discussion today.

Heidi Ellsworth: Everyone wants to talk about the weather. It's just a given.

Curtis McDonald: They do. It's one of the easy things to talk about and certainly with what's been going on in the news headlines coming out of the spring season, a lot to talk about.

Heidi Ellsworth: A lot to talk about, and we're heading into hurricane season and the prediction, so excited to hear some of your thoughts.

Curtis McDonald: Yeah, we'll talk a little bit about that as well.

Heidi Ellsworth: Yeah. Well, let's start, Curtis, let's start with some introductions. So if you could introduce yourself and tell us a little bit about CoreLogic.

Curtis McDonald: Yeah, absolutely. As you mentioned, I'm with CoreLogic. I oversee our products for our weather space, so product director, I do have a background in meteorology. Been with CoreLogic a little over 13 years now. I actually came into CoreLogic through an acquisition of a company called Weather Fusion, which we started out as Livehailmap.com for anybody, those that have been maybe in industry that long. Yeah, I know you do. But yeah, any of the roofing contractors that we worked with over the years. So coming into CoreLogic, it was really quite the change going from a small startup into CoreLogic as a large organization. CoreLogic really is a leading company that provides property data and insights. And really the mission that we have is to get faster and smarter within the property ecosystem and then also bring in the people like be more people-centric and they certainly have a big component of that.

So CoreLogic, that's really what excited me with CoreLogic was just the amount of data that they have and how we can really take that and ties into our vision of fueling a thriving global economy or global property ecosystem. And then ultimately, how do we build a more resilient society as we move further into time, as we'll talk a little about the changes in environment, changes in climate, but CoreLogic certainly does a lot. We partner with millions of real estate professionals, tens of thousands of financial institutions, thousands of lenders and servicers. We work obviously for those in the insurance space, so we work with hundreds of insurance carriers as well as the federal government. So we provide quite a bit of data right into the federal government. Again, all around the property ecosystem, property characteristics and we cover about 99.9% of all properties in the US in terms of data components.

Heidi Ellsworth: Wow. That's huge. That is huge. And really weather is affecting every one of those properties that you are working with and have information and data about. So you know what, let's start a little bit with some of that weather and what we're seeing with extreme weather pretty much all the time. What are you seeing so far or some statistics that you can share for 2024? Because sometimes I think we all think it's extreme, it's just we're looking at it, but do the numbers really support that?

Curtis McDonald: Yeah, absolutely, and certainly we will talk about mostly the severe and convective storm season now that we're out of the peak of the severe convective storm season, at least for a big chunk of the US, we still, as we go into later into June and through July, you start seeing more severe hail and tornadic events maybe in the Colorado and further north in the northern plain, but looking at certainly 2024 through May. So this was pulling some numbers or looking through some numbers, and when we look at the number of hail, tornado and wind from a report perspective, like who's reporting and then correcting those. Essentially hail is 50% above the 10-year normal for 2024, the first half of 2024. And then even more concerning are the tornadoes, 70% above the 10-year normal, we've seen just a tremendous amount of tornadic activity in many parts of the Midwest and then through the central and southern plains in 2024.

And then 2023 also was very active from a hail perspective, significant hail perspective. And then looking at again, '24 this year, 50% above that 10 year norm. So certainly hail for 2023 and 2024, well above the 10-year averages. And certainly a big problem in the industry, not only obviously in the construction industry, in the insurance industry. So looking forward to talking a little bit more about that. Primarily it's been really driven by... We've had below average anomalies for what we call upper level heights across the western US.

And what that does, it introduces the jet stream down across the central and southern plains that was dominant through April and May. We also have a very warm Atlantic sea-surface temperatures, which are going to be what we'll talk a little bit too on, we talk about hurricanes, but what that does is it provides the fuel, that moisture, that thunderstorms need to produce these significant hail events, tornadic events. And the warmer the air is, the more moisture that can hold, the more moisture there is, the more fuel there is for these types of events. Yeah, so it's just been a really active, the southern plains, central plains, we're starting to see a little bit of a downtick in the severe weather, thankfully and hopefully it'll remain that way through the rest of '24. But as you mentioned, we're coming into the hurricane season.

Heidi Ellsworth: We're coming into hurricane season. So one of the questions I have, and I hear this a lot from contractors and from just people in general overall, they're like, "Well, it's a 100-year storm," or I remember when the river froze over 100 years ago, so nothing's really changed. But it seems like when we look at the trends for at least even the last 20 years, really there has been this rise. I mean when you say 50% for hail and 70% for tornadoes, that isn't just a little bit of an increase, that is extreme. So when you really look at the trends for the last 20 years, what are you seeing?

Curtis McDonald: Yeah, I mean it's a little bit of a tricky question. I mean, there certainly is more and more reports of these events occurring as more people have access to technology and cell phones that call in the reports. Also, I think it's really important to understand over the last 20 years, the targets, cities populations have continued to grow as well. So you think of it takes one storm hitting the right area to really cause a lot of problems. I think DFW, the Dallas-Fort Worth metro is a really good example of that. Over the last 20 years, there has been a tremendous amount of growth on the north side of Dallas-Fort Worth and for whatever reason that Denton area down through the south of the north side of the metro there, they typically do get a couple of significant storms a year through that area where 20 years ago it was mostly open fields that were being impacted.

Now it's packed with commercial properties and lots of residential properties as well as we don't want to again take into account, obviously as I mentioned, sea surface temperatures because that does drive a lot of different things. Growth from severe and convective storm perspective, rainfall all the way to the fuel for hurricanes as well. In 2023, we saw a well above average sea surface temperatures across the Atlantic and this year they are record setting, so the highest they've ever been for this time of the year across the Atlantic, which is certainly concerning.

And hopefully we got to keep an eye on that trend because we don't want the Atlantic continually to be record, provide record warmth because again, it provides a lot of fuel for these different events and certainly has a big impact on the outcome. So I think the combination of as we continue to expand the urban sprawl, these targets are getting bigger and bigger. And then certainly the amount of events and the severity of events certainly has been an uptick and it just creates, I wouldn't say the perfect storm, but you're certainly going to have more events as you get bigger targets and have more significant storms.

Heidi Ellsworth: I think it's really interesting talking about the increase in temperature in the Atlantic and I don't know, we just came off, in Pacific Northwest and northern California, huge amounts of snow and weather that we haven't seen in quite a while. And then when you talked about Dallas, Texas, that really makes me think of what they've gone through with the ice storms down there that just seem to be so much larger or maybe we just are seeing more in the media, I'm not sure which. But how much does that the weather year round start influencing or is that all that influence coming from the warmer temperatures in the Atlantic and some of the changes with the jet stream?

Curtis McDonald: Yeah, and there's actually still a lot of research going on and how the changes in our climate environment will have impacts. The two things that we really look at for at least hurricanes and severe and convective storms and even to an aspect, winter storms is going to be the jet stream, which is essentially wind speeds a loft as you move off the ground and then as well as the instability, which instability is how much cold air loft comes over warm moisture. So moisture has certainly a big impact on the instability. So those contradict each other a little bit.

So as we continue to warm and we warm the atmosphere not only at the ground, but as we warm the atmosphere higher, a loft above the ground that could diminish the wind speeds, which is what's providing the sheer that's needed for at least severe and convective storms. But then as we get warmer and warmer again, that moisture also plays into all types of extreme precipitation. So that's going to be one of the key things over the next... Certainly as we head into later this year and the next year and beyond, is what's really happening with the sea-surface temperatures, not only in the Atlantic but globally, but for the US we're really interested in what's going on in the Atlantic because that has and certainly the Gulf of Mexico that has the most impact to the US.

Heidi Ellsworth: And for the hurricanes as they're coming through.

Curtis McDonald: Yes, absolutely. Yeah. So concerning this year, and again, we could have a record setting hurricane year and no hurricanes hit the US or we don't have a record setting year and it takes one or two hurricanes to cause $50 billion in losses. It's like what we saw with Ian in 2022, I believe it was down in Florida. Yeah.

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Heidi Ellsworth: So looking at this and the fact that you're watching the temperatures in the oceans and how they're influencing the weather and what's happening, what are some of the things you're hearing yourself through your research and through other meteorologists looking at the next five years around weather trends?

Curtis McDonald: Yeah, I think one of the biggest things that, and what we're already seeing, we saw this year with the warm above normal temperatures in the Gulf as well as in the Atlantic, again, that moisture. So there's more moisture available that's being transported by the winds as winds come over, the jet stream comes over the Rockies and actually induces southerly flow at the surface. So as you get to the ground and it brings that moisture up out of the Gulf of Mexico, both further north what we're seeing as well as further east. So as we head into really the next several years, again, really keeping an eye on the temperatures in the Gulf and how much of that does have impacts to the severe weather season spreading further north and east out of your traditional tornado alley, if you will, in the central and southern plains.

So certainly looking at areas across Minnesota, Wisconsin and parts of even the Northeast or Mid-Atlantic likely thinking we'll see an uptick in general to not only the number of events, but maybe the number of more significant events. The storms that producing two inch and greater hail fall are more significant tornadoes, things that people aren't really used to a lot of times out there, at least in widespread nature. Not saying that's necessarily going to happen, but that is something that we're certainly wanting watch out for as well as the front range of the Rockies.

So that moisture is actually being able to get really close to the Rockies. You think of it, the moisture, it's a fluid, it's fluid dynamic, so you can think of it putting up against the Rocky Mountains. So as those waves come over and the energy and the lift sparks those thunderstorms, there's more moisture, more energy, they can get stronger and produce the larger hail. So we've seen that in the front range of the Rockies over the last, certainly the last three to five years. There's been some pretty significant events across Colorado Springs northward into the Denver Metro and north side of the Denver Metro.

Heidi Ellsworth: And they've been seeing it this spring and last. I know the contractors there are very busy trying to get everything fixed up after that. Okay. When we're looking at the severe hail, what are you seeing and how are you tracking events with the CoreLogic reactor insights and forensic data? I think contractors are interested in the fact that you're a meteorologist, that you are working on this every day to track that. How does that work?

Curtis McDonald: Yeah, absolutely. So CoreLogic has and continues to really invest very heavily into our post-event weather data. So that includes currently our tornado model, our wind model, as well as our forensic hail model. So what we do is we've come up with a pretty unique way of overcoming the limitations of the data sets that we have available to us. For example, the National Weather Service owns and operates a series of weather radars across the US. But when it comes to hail and even tornado and winds, one of the biggest limitations to the weather radars, there's only so many of them. So as you move out away and distance from those weather radars due to the curvature of the earth, you're actually... The beam or where the radar sees is further and further up off the ground. So just because the radar sees maybe some high reflectivity, which could represent some hail, doesn't mean that that's going to fall straight to the ground.

So in order to overcome those limitations, we have really come up with a unique solution of and built a really robust backend tool that brings in just a tremendous amount of data. And these data includes any really ground observation we can get our hands on. So that would be coming in from the National Weather Service or the storm prediction center or maybe coming in from news outlets or social media. And we also partner with many others to get some data. And what that does, each one of those reports are quality to controlled. We have a team of meteorologists, I'm not the only meteorologist at CoreLogic, so we have a really great team of forensic and they essentially almost 24/7 now, they work around the clock and they review every single one of those reports. And what those reports do, they can actually flag out reports that maybe they don't have enough confidence in like the hail size or the location or sometimes day and age.

It's really easy to report fake stuff and we just have to flag that or remove that from our algorithm. So we leverage those quality controlled ground observations, overcome the limitations of the weather radar and then we leverage the weather radar to overcome the limitations of those ground observations. And as we continue to expand that model out, we are actually getting ready to release a new forensic hail model that's coming up in August. That's something that we've been working on for almost two years, really excited about. So we'll be making some... Releasing some information into the market here pretty quickly.

But yeah, really excited about what the team's been able to accomplish in terms of accuracy. Is anything out there 100% perfect? No, but in terms of the approach that we've taken, things that we've developed and what we've validated, we are getting a lot of traction with the carrier as well as contractors and just the quality of the data. So that's just a little at a high level, there's a lot to the models, it's pretty complex, but we do have a series of PhD meteorologists as well that actually build and work on those core models for hail, wind and tornado.

Heidi Ellsworth: When you think about that, those models are so important even really for the relationship between the contractor and the insurance company too because... And the end user, obviously the insured, to be able to have accurate reports and be able to really put their claims in a way that is fast and easy and the weather changes can cause all kinds of problems. And sometimes people don't realize that it was a huge storm, to your point. So I mean that new software sounds incredible.

Curtis McDonald: Yeah, yeah. I think it's all about preparedness and then response. So there's certainly things that the construction industry can continue to do and what has been doing, which is enforce and build better quality and be more resilient to these types of events. And I think that'll continue and should continue for certain. And then CoreLogic is certainly playing a part in all of that, but trying to bridge the gap, if you will, between the construction industry, the lending mortgage industry, the servicing industry, as well as the insurance industry. We are playing in all of those spaces, and we do have in those data sets that really in a lot of ways compliment each other and create some pretty incredible solutions in the space.

Heidi Ellsworth: So when you're looking at what's happening right now with the insurance companies and construction and extreme weather, what are some of the trends you're seeing that way that contractors should be aware of that things may be changing or not? Because with this many extreme storms, it just seems like at some point things are going to have to change a little bit.

Curtis McDonald: Absolutely, and they are changing. Last year I think was the year that really, I won't say the straw that broke the camel's back, but a lot of carriers suffered last year and in fact became solvent, including my carrier personally. I'm in Oklahoma City, so I'm right in the heart of the severe and convective storm area, if you will. And one of the things is we're getting so close with the continued rise in premiums as rising deductibles, I'm getting very close to self-insuring my roof. So there has been talks with some carriers, is there an avenue where we don't insure roofs and we start offering a supplemental policy for roof cover as well as I think you're going to see the industry have to really continue to adopt the technology and get more efficient in terms of how they respond on the insurance side and also classify these events to the right states of losses.

So I think the carriers are going to start really trying to get more accurate in terms of the dates of loss that are being recorded specifically for hail. Hail is a challenging one because that's one of those perils that certainly the damage can go undetected for quite some time or a lot of homeowners that maybe are outside of the common areas that receive these damaging hail storms, they're not even aware that hail can cause damage to your roof. So again, having that data, having the products and solutions that tie into workflows and automation, I think are going to be really key over the coming years. And that's again, where CoreLogic is really, really focused at is again, bridging that gap, leveraging the data and exhaust data that comes out of different solutions and products that we have, let's say on our real estate and mortgage side of the house and how that can be fed into on our insurance side.

Like example would be we collect all, almost every property that gets listed on the MLS or a large percentage of those, we get access to those photos. So we not only have imagery outside the home, but we also have imagery inside the home. So what that means is we can get better and faster at understanding what potential losses could be after an event. To your point, to try to prevent some of these surprises, it's pretty shocking to me. And I talk, it's across the construction industry, the adjusting industry, insurance industry, when we have some of these disasters or when a big catastrophe occurs, it's still kind of chaos for everybody. And I really don't understand why that's still happening. I mean I do, but there's definitely things that I've seen a lot of companies continue to make strides moving forward. I think that has to happen. We have to get smarter, we have to get faster and we can't be surprised anymore. These events are... We've had a lot of them. We've had enough of them, but they're not going to go away.

Heidi Ellsworth: No, they're not going to go away. And that brings me back around where I really wanted to... We are heading into hurricane season and then end of summer we are in wildfire season. I'm in the western states. Wildfires have become so much more predominant in these areas. So one of the things that you said was preparedness for the contractors to have the right technologies, to have the right processes in place and also for homeowners to do the right things with their properties. Basically saying, "I want a resilient home. I want a home that will survive 130 mile per hour winds or that will be more likely to survive flying embers." What are some of the things that you're hearing on that front from, I am going to say basically from the insurance companies of them starting to demand that proactiveness from both the homeowners, the insured and also the contractors who are building their buildings?

Curtis McDonald: Yeah, I think that's a great question. I mean, there's a lot that CoreLogic, again plays in this area. Starting with the insurance side, we do have a whole series of deterministic models. And what I mean by that is looking at what is the probability or likelihood of an event occurring over the next five years. So those would be our risk scores and those are going to be typically used for the underwriters within the carrier. And we've done released some new things recently, like for an example would be our wildfire resilience score. So we're actually looking at properties and properties that the homeowners are taking more protective action in wildfire prone areas. Not having cedar shake roofs or brush away from your property and not having all these cedars right up against your property. Those scores are help...

Ultimately looking to help drive the premiums down for those customers that are taking that extra effort.
So we do have a whole series of different resources and specifically for contractors, I would recommend we have each year if there's an interest in the severe and convective storm side of things, we put out a really good report, call our severe convective storm report. It goes through and gives a recap of the prior year where the events were also looks at some of the higher risk-prone areas. We also do that for hurricane. So we have a hurricane risk report that we put out.

And then finally we have a whole website that's dedicated to disaster and catastrophes where we'll summarize the events, we'll give property counts, we'll give some information on how many residential, how many commercial properties were impacted and a lot of really good information. And that's our Hazard HQ website from CoreLogic. And then of course the products that I support, we do a lot again in the insurance and contractor space, whether it's insight, again, just being able to monitor the weather, understanding what customers or maybe past customers for a contractor that are likely going to be impacted or has just been impacted, that they can be more proactive and provide maybe some of those emergency services to those customers that they had done prior business with.

All of that with hopes of further mitigating any further damages to that property. So in essence, there's a lot there, but we do have the resources and more than happy to provide any information out. But I think the good starting point would be with our Hazard HQ site. I think that's before an events happen. And then after events happen, we put out a lot of really good information.

Heidi Ellsworth: I've been there. It's a great site, great information. Yes, yes. I love it. So you mentioned earlier on, but just one more time, a little bit of forecasting and I know every year there are reports that come out on forecasting the hurricane season and what's going to happen. Any thoughts on... I mean I know you said it's going to be larger, but any other information around the hurricane season coming up that we're walking into or I guess we're already started. We

Curtis McDonald: We're in there. I mean, we had Alberto, first tropical storm Alberto this last couple days that came in, made landfall South of Texas, but there was a lot of rain through South Texas. The good thing was it did bring a lot of rain, but there was also some spin ups or some tornadoes that were caused from that tropical storm. But yeah, I think the things that we're watching, the main one is going to be those sea temperatures. There is a tremendous amount of energy and fuel for these storms to take and use as well as we're moving out of... We were in an El Nino and we're moving into La Nina.

So that certainly can have an impact on the number of events or number of tropical events that form in the Atlantic. So certainly I think just given where we're at, we will have an above average season for sure and more likely, probably more significant hurricanes. Again, that's not saying that everyone's going to hit the US, that's not going to be the case. Hopefully none hit the... Make landfall, but again, it just takes that one storm to make landfall in the heavier populated areas to really cause a lot of problems and drive up a significant loss.

Heidi Ellsworth: And just for all of those out there, because I hear this all the time, El Nino, La Nina transition in between. Moving into a La Nina, and hopefully I'm saying that right, what does that look like, wetter, colder? What's the feel of that?

Curtis McDonald: Yeah, it depends on, and what drives that is going to be actually out in the Pacific towards the electoral Pacific down and it's upwelling and caused by different shifting of winds. But you basically, you'll have warming waters that will be at the surface for El Nino and then actually upwelling and bringing up cooler waters when we're in La Nina. And that actually does have impacts on driving the jet stream across the US. So you can certainly have varying different impacts between El Nino and La Nina. One of the big ones for severe and convective storms is going to be in El Nino.

We typically see more severe storms, more significant hail, tornadic events in parts of the central and southern plains, which we certainly saw this year. And then with La Nina, we typically do see severe and convective storms increase across parts of the Mid-South, so Arkansas into Tennessee, Alabama, Mississippi, maybe over into Georgia. So we'll have to keep an eye on as we go, trying to transition from an El Nino now going into neutral. And then we're slowly going into a La Nina, how long will that continue, will that continue into next storm season from American Storm front? And then also, obviously it could have some impacts, but probably a little less on the hurricane season just because we're getting closer to more neutral right now. But we'll have to again, really keep an eye on, could have impact on winter weather as well. So I know you're in the northwest.

Heidi Ellsworth: So I think, and we are very affected by it.

Curtis McDonald: Yeah, more La Nina trends, I think the more wet and snowy conditions across the northwest.

Heidi Ellsworth: Yes. Which we've been having even in El Nino. So it's been...

Curtis McDonald: And that's the thing that's just in general, but things nowadays, again, it takes one storm or one event to really change the perception on people in terms of how a weather event can impact them certainly in the future.

Heidi Ellsworth: Yeah, their lives. And it does. Curtis, thank you. This has been so informational. I love talking about the weather and I love the fact HazardHQ.com. Great resources for people to reach out and get more information. So thank you so much for your insights and your wisdom, and we'll have to have you back again.

Curtis McDonald: Yeah, absolutely. Anytime. Thanks for inviting me and having me. It's been great. I can talk for an hour on weather with one breath, I think.

Heidi Ellsworth: I love it. I love it.

Curtis McDonald: Maybe one day we'll get you out and we can storm chase and see some tornadoes.

Heidi Ellsworth: Oh, I'm from the Pacific Northwest. We're scared of tornadoes. Give us a good snowstorm and we're just fine. But no, thank you. I would love to do that and I would love to see, and everything that you're doing for the industry and all the great information that's helping so many consumers and contractors, so appreciate it. So thank you so much.

Curtis McDonald: Thank you. Thank you.

Heidi Ellsworth: Take care. And thank you all for listening to this Contractor Outlook from The Coffee Shops. This is an ongoing podcast. It will be coming out the first Wednesday of every month. And we're talking to the experts. We're bringing experts from the outside, the industry inside to talk to you and help give you the information you need for your business to grow throughout all trades in construction. My name is Heidi Ellsworth. Thank you so much and we will be seeing you next time on Contractor Outlook.

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