Gulf states brace for real estate storm
Prices are rising predictably, but what does that bode for poor renters and the character of communities?
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."
New Orleans itself has a historically low rate of homeownership - less than 50 percent, well below the national average of 69 percent, notes Yun at the NAR. Depending on how the city is rebuilt, those percentages may go up or down, which, in turn, will influence the health and wealth of the housing sector.
Along the Mississippi coast, Mr. Kotkin sees a likely boom for pricey second-home communities catering to snowbirds, empty-nesters, and retirees from the Midwest and Northeast. The combination of warm weather, comparatively cheap housing, and low state taxes makes for a compelling recruiting pitch.
That scenario haunts Stallworth, the Biloxi councilman. He says preserving racial and economic diversity along the coast is crucial to maintaining local heritage.
"It would be a crime" to cater only to affluent out-of-state buyers, he says. "We need to have a mixture. But the people who are here can't afford $250,000 homes. It pushes everyone away."
Even the specter of building casinos on land makes Stallworth uneasy. He won't oppose the move because no jobs can be sacrificed at the moment. Still, he says, the poverty and lack of white-collar jobs must be addressed as rebuilding begins.
As many observers note, opportunities for speculating and price gouging may be increased by the reputations of Mississippi and Louisiana, the states hit hardest by Katrina.
"Neither one of them has been a showcase of progressive politics," says Frank Popper, professor of land-use planning at Princeton University. For that reason, he cites Mississippi Gov. Haley Barbour's hiring of architect Duany, known for his pedestrian-friendly neo-urban neighborhoods, as a positive sign. "If that holds up, it is a remarkably progressive response."
Kotkin counters that New Urbanists tend to develop pricey neighborhoods, not a good portent for the poor who were abandoned during the storm's aftermath and later scattered across the country to makeshift shelters.
The ethical question - beyond the short-term question of whether developers and others should take advantage of the topsy-turvy commercial and residential real estate sectors - resonates in New Orleans and the Gulf Coast. These are areas long dominated by poverty, but whose character and appeal stem in large part from the image of dockworkers and lawyers, tattoo artists and doctors, waitresses and bankers living side by side in neighborhoods.
Experts, including Kotkin, envision a sanitized redevelopment of New Orleans that would preserve tourist attractions while leaving a smaller city populated by wealthy singles, gays, couples without children, and a scattering of artists and musicians. "That's great if you're a real estate agent," he says. "But being the San Francisco of the South isn't so great if you're a working-class New Orleans resident."
That scenario also bucks national expectations, experts say.
"The thing that was so bothersome about the flood and the government response was how completely people at the lower end were harmed," Mr. Popper says. "Something definitely needs to be done about that because it upset everyone watching it on TV."
Author Ernest J. Gaines, known for his novels chronicling the everyday heroism of poor blacks in south Louisiana, worries about the potential for minorities to once again be overlooked.
"I'm afraid of what could happen," he says. "I'm afraid many of the blacks who left will never come back, and New Orleans might become a mostly white city. I hope this doesn't happen but I think it could happen."