AP Centerpiece: Post-Katrina real estate booming
5/8/2006, 12:11 p.m. CT
By RUKMINI CALLIMACHI The Associated Press
NEW ORLEANS (AP) — The 2,200-square-foot house promises three spacious bedrooms and two-and-a-half baths — a bargain at $175,000. Except for the fact that the home, located in one of this city's previously elegant neighborhoods, has been gutted to the studs and has no drywall, no wallboard, no fixtures.
"Home was flooded by Katrina," reads the advertisement posted by the listing agent at one of the city's largest real estate firms. "Ready to turn into your dream home."
The pitch is less far-fetched than it may seem: Although vast swaths of this hurricane-battered city are still without electricity and basic services, residential real estate sales are at a fever pitch, a shining spot in an otherwise struggling economy.
For the first quarter of the year, sales of single-family homes in the greater New Orleans area zoomed to $826 million, a jump of 60 percent over the first quarter of 2005, when sales totaled $517 million, according to New Orleans Metropolitan Association of Realtors; 3,829 residential units were sold, 960 more than the same period in 2005.
Experts say there's nothing to be surprised about: One of the ironies of natural disasters is they're often good for real estate. It's a pattern real estate professionals witnessed in Florida after Hurricane Andrew and in Los Angeles in the aftermath of the Northridge earthquake.
"To use a terrible analogy, it's like watching 'Gone with the Wind' for the fifth time," said Arthur Sterbcow, president of Latter & Blum Inc., the 90-year-old real estate firm based in New Orleans. "It's completely predictable. The market reacts the same way each time. It's like watching a football game and having the play book in your hands."
Last year's play unfolded like this: As Hurricane Katrina bore down in late August, thousands fled.
Trying to stay close to home, many ended up putting down temporary roots in satellite communities like Baton Rouge, where evacuees pushed up residential sales 48 percent to $1.2 billion in 2005, compared to $788 million in 2004, according to the Greater Baton Rouge Association of Realtors.
But the pull of home is strong, and many evacuees have since returned to their flooded city.
Some were lucky enough to find their homes intact, needing only minor repairs. At the other end of the spectrum were people like Jim Peckenpaugh, 60, whose home in the upper-middle-class Lakeview neighborhood took on 9 feet of water.
He initially tried to find a dry house, but those in Lakeview were selling for more than $400,000, pricing him out of his own neighborhood. Instead, he found a bargain: a three-bedroom, also in Lakeview, selling for $250,000. That's because it swallowed only 3 inches of water.
It wasn't his first choice — the first flooded house he tried to buy was snatched up by a more aggressive buyer. "At night, as I was driving around looking at houses, I would see people with flashlights doing the same thing," he said.
Most returning homeowners bought dry properties in the unharmed periphery of the city.
As those homes became scarce, more intrepid homeowners, as well as investors, began working their way toward the core of the city, say real estate agents and developers. National homebuilder KB Home has acquired 58 finished lots in New Orleans, as well as a 3,000-acre parcel in Jefferson Parish, a neighboring suburb.
"You hate to say it, but these disasters tend to spark an energy that people have to respond to," said Thomas Stevens, president of the Washington, D.C.-based National Association of Realtors. "Immediately after, what you see is this sense of, 'Oh my God, it's a disaster. What do we do?' And then people's lives get back to normal and they say, 'OK, I have a home. Do I repair it? Or do I sell it and buy another?'"
To be sure, the real estate picture is far from even: Areas like St. Bernard Parish, which took the brunt of last summer's storm, are lying fallow. Not a single house sold in the first three months after the storm; only one sold in the fourth month, fetching just $11,000 in an area where the average home once sold for $109,000, the New Orleans Realtors Association said.
The most heavily damaged neighborhoods are still in limbo: In order to get insurance, some homes will have to be raised as much as 3 feet, an expensive proposition. Rather than going through the expense and hassle of having their homes raised, many homeowners are choosing to buy in the city's less damaged neighborhoods, fueling sales there.
Although real estate transactions in many Gulf Coast firms are setting records, the road to ownership post-Katrina is far from smooth — especially on the insurance front.
Both State Farm Insurance Co. and Allstate Corp., the nation's No. 1 and No. 2 insurers that together controlled over half the homeowners' insurance market in Louisiana pre-Katrina, have stopped writing new policies in New Orleans, the companies said. Finding affordable insurance is a struggle.
"I basically went down the list and called every single insurance company I could find. No one is writing in Orleans Parish right now," said Robert Boulanger, who's in the process of closing on an unflooded house just outside the French Quarter, one of the city's most desirable neighborhoods dating to the 1700s.
With private insurers pulling out, buyers are overwhelmingly forced to seek coverage from the state-run Louisiana Citizens Property Insurance Corp., which charges higher rates than its private-sector competitors. For 28-year-old Boulanger, a construction manager, that means he'll pay over $4,000 this coming year to insure the home he's buying for $240,000.
"It's really pushing the envelope of what I can afford," he said.
In flooded neighborhoods throughout the city, "For Sale" signs are sprouting from gray lawns, beside mounds of stripped wallboard. With doors punched in, Realtors advise prospective buyers to simply walk in: "Easy to show. Door is open," says one ad for a flooded, white shotgun.
Other ads promise the chance to own "the house of your dreams," as did the Coldwell Banker ad for the 2,200-square-foot home that caught the attention of 24-year-old Autumn Nurton.
"Before the storm, I could never have afforded a house like this. It's the house I've always wanted and now I can afford it," said the exuberant young woman. "I have to do the work, but in a sense that's even better because I can put myself into it. I've already sort of moved in in my heart."