Gulf states brace for real estate storm

Real estate reality keeps Bill Stallworth awake at night. The Biloxi, Miss., city councilman wants to retain his Gulf Coast hometown's working-class population, but fears redevelopment in the wake of hurricane Katrina will leave many seeking shelter from another storm: higher home prices.

Mr. Stallworth estimates that 50 to 70 percent of the local housing stock has been obliterated or rendered obsolete, making what remains valuable property. Simple supply and demand makes coping with that problem challenging.

"It gives me nightmares," he says. "I am very concerned."

Median housing prices were $152,600 in the New Orleans metropolitan area and $124,000 in Gulfport-Biloxi during the second quarter of this year, according to the National Association of Realtors (NAR). New quarterly figures - including the period affected by the hurricane - have yet to be released.

Hurricanes have historically had short-term impacts on home prices, says Lawrence Yun, an NAR economist. For example, Florida was battered by several storms last year and today median prices in every sector of the state are up 20 percent or more compared with 2004, Mr. Yun says.

Many hurricane evacuees and residents affected by Katrina vow never to return, but plenty more - not to mention opportunistic developers - retain a strong interest.

Both profiteers and those affected by the hurricane agree on one universal real estate maxim in these post-Katrina days of renewal along the Gulf Coast: It's all about location, location, location. "There will be a lot of new construction because the federal government, for one, has made a commitment," Yun says. "But there are so many wild cards. Who are the customers? Who comes back and who doesn't? There are too many unknowns."

Urban planners and other experts differ on the prospects for an equitable real-estate renaissance. During the past several weeks, the state of Mississippi has hired renowned New Urbanism architect Andrés Duany to assist with plans for redeveloping the coastline. The state has also approved land-based casinos, a move aimed at rescuing 14,000 jobs displaced when Katrina destroyed riverboat casinos docked near the shore.

In Louisiana, developers, real estate agents, and politicians are grappling with similar redevelopment issues while working with federal officials to house as many as 120,000 people displaced by Katrina in makeshift trailer villages across south Louisiana.

"The feeling I get is that the tourism structure is going to be rebuilt," says Joel Kotkin, senior fellow at The New America Foundation and author of "The City: A Global History." "People are going to do things that are ephemeral: casinos, vacation homes. This is the easy way - and people tend to take the easy way."

Some short-term trends are evident. Even damaged properties fetch premiums in some areas, with undamaged homes priced about 20 percent higher than pre-Katrina levels, says Dan Triplett, owner and president of Gulf Coast House Buyers in Gulfport.

In New Orleans, the only residential sales taking place are on a cash basis and, as of late last week, the Orleans Parish recorder's office had not reopened, says Michael Haddad, editor of New Orleans Real Estate News and a residential-investment property specialist at ReMax.

For now, Mr. Haddad says, the lone certainty is the spiraling cost of rental properties. Those have spiked 40 percent, 50 percent - even 60 percent, in some cases.

As for residential properties, "I see them going up, but it's hard to say by how much. Things haven't stabilized here yet."

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