I can't believe they lost their home in the flood. That's awful.

that 在这里是指示代词，指代前面提到的"他们在洪水中失去了家园"这件事。 awful 由词根 awe（敬畏）和后缀 -ful（充满...的）组成，原意是"令人敬畏的"，现在多表示"糟糕的、可怕的"。