In New Orleans, Housing Sales Are Bright Spot
Four months after the devastation of Hurricane Katrina, the housing market in New Orleans is better than anyone might reasonably have expected, with prices in many areas at or above their pre-storm levels. The market is spotty in the hardest-hit areas, such as New Orleans East, Lakeview and other communities ringing the southern edge of Lake Pontchartrain. By comparison, in the high-and-dry West Bank area west of the Mississippi River, the dollar volume of home sales in November was up 99% from a year earlier, according to Latter & Blum data, and sales more than doubled in the city’s Garden and Warehouse districts. Following Katrina, 80% of the homes in New Orleans were flooded. The bulk of the home buyers are local residents who are purchasing a second home to live in while the fate of their first home is determined by insurance companies and government officials. Buying is an attractive alternative, since the cost of renting has spiked by 50%. California builder KB Home last month bought 3,000 acres of land in a suburb to the west of the city where it plans to build as many as 20,000 homes. The RAND Corporation has predicted that the city’s population in three years will be no more than 275,000, down from 465,000 before the hurricane. (www.nytimes.com)
New York Times (1/1/06); Gary Rivlin
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In New Orleans, Ridding Homes of Mold Is a Big Job
Gutting is one of the hottest jobs in post-Katrina New Orleans, where as many as 250,000 houses were flooded — some by up to 20 feet of water. While the core of the city is intact, with perhaps two-thirds of the businesses in the French Quarter and Garden District back in operation, New Orleans remains ringed with hundreds of square miles of water-damaged neighborhoods. Gutting is a prerequisite to rebuilding the interior of homes, and even owners of waterlogged houses who don’t intend to return are gutting them in hopes of selling the shells, at a fraction of their pre-Katrina values. It typically costs $2 per square foot for the removal of moldy walls, soggy insulation, warped and rotting baseboards, ruined electrical wiring and destroyed furniture and keepsakes. Residents of one flooded neighborhood spent $6,000 to have their house gutted. A year ago, it was appraised at $285,000. Today, they are asking $60,000 for the shell. (www.realestatejournal.com)
RealEstateJournal.com (1/6/06); Ken Wells, The Wall Street Journal Online
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Market Forces: After One Lakeview Family Decided to Sell Rather Than Rebuild Their Home
With the realization that three-fourths of the area’s homes were not flooded significantly in the aftermath of Katrina just now starting to get out into the marketplace, real estate is showing signs of life in New Orleans’ Lakeview, which consists of about 2,000 homes in West Lakeshore, East Lakeshore, East Terrace and Lake Vista. One family gutted their previous home, which had taken on eight feet of water, and sold it for $150,000 and then bought another home where there had been only eight inches. They purchased it at a bargain price of $325,000, compared to an estimate of $650,000 if it hadn’t been damaged. According to NAHB, about 70% of a home’s value, excluding the cost of the lot, is lost when the property sustains catastrophic flooding. It costs between $40 and $50 per square foot to repair first-floor flooding, while new construction can run between $100 and $150 per square foot and up. Wade Ragas of Real Property Associates, a local real estate consulting firm, said that most home owners displaced by Katrina are going to make their decisions on whether to dump or rebuild property within two years. After that, it is questionable how strong demand will be, which is why he believes that KB Homes and the Shaw Group of Baton Rouge need to move quickly on their proposal to construct a West Bank community of 20,000 housing units. (www.timespicayune.com)
New Orleans Times-Picayune (1/2/06); Greg Thomas
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Housing Prices Had Strong Run, Now What? Experts Divided Over San Diego’s Outlook
Economists from across the country are closely watching San Diego County’s real estate market, where prices have surged far beyond what many thought possible. Fiserv CSW, a market research firm in Cambridge, Mass., last month predicted that the area’s housing prices will drop 3.4% this year and 5.6% in 2007. In a survey completed for Fortune magazine, the firm concluded that San Diego is second to Las Vegas as the most vulnerable housing market out of 100 analyzed. An analysis by Cleveland-based National City Corp. concluded that prices in San Diego are 46% higher than can be supported by local incomes. Closer to home, University of San Diego economist Alan Gin and others concede that the area’s housing may be overpriced but point out that this doesn’t mean prices are going to crash. Gin predicts local prices will increase this year between zero and 5%, which could raise November’s median home price of $518,000 to $544,000. (www.signonsandiego.com)
San Diego Union-Tribune (1/1/06); Roger M. Showley, Lori Weisberg and Emmet Pierce
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If You Build It, Burglars May Come
Against high demand for building materials in the hurricane-ravaged Gulf Coast, thieves from California to Florida are stripping almost anything that’s not nailed down at some building sites, hauling away appliances, bulldozers and even the copper used in electrical circuitry. “We believe it’s a multibillion-dollar-a-year problem throughout the U.S.,” said Earl Gunnerson, executive director of the Construction Industry Crime Prevention Program of Southern California. Thefts add at least 1% to the sale price of a new home, according to Gopal Ahluwalia, vice president for research at NAHB. Hurricane Katrina and other storms helped drive a 22% increase in heavy construction equipment thefts in Gulf Coast states from Florida to Texas from September through November compared with the same period of 2004, according to the National Equipment Register. (www.usatoday.com)
USA Today (12/28/05); Charisse Jones
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Rates on 30-Year Mortgages Drop This Week
In its latest survey of mortgage interest rates for the week ending on Jan. 6, Freddie Mac reported that the average rate on a 30-year, fixed loan dropped to 6.21%, the lowest it has been since late October. The financial markets have been trying to decipher the Federal Reserve’s December minutes, “which seemed to hint that the Fed might slow the pace of rate hikes in 2006,” said Frank Nothaft, Freddie’s chief economist. “As a result, mortgage rates were little changed this week.” Adjustable-rate mortgages currently account for about 30% of new loans, and Nothaft is predicting that they will decline to about a 25% market share by the end of the year. (www.forbes.com)
Forbes.com (1/5/06); Jeannine Aversa, Associated Press
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