Real Estate Market: What Hurricane? by Broderick Perkins
The labor market is reeling from jobs lost due to this year's hurricanes in the Gulf Coast region -- home to the nation's fifth busiest port. The double whammy of two hurricanes in the oil and gas producing and shipping region will likely spike energy prices this winter when demand is highest. And both business and supply pipeline disruptions will place upward pressure on lumber, cement, gypsum board and other construction material costs that could account for two to three percent of any home price increases next year. In the eye of the economic storm, however, it's apparently a good time to buy a home -- or sell it at a hefty profit. In areas most devastated by hurricanes this year speculators looking for bargains and home owners looking to cash out while the cashing out is good were making their moves even before the toxic gumbo was drained out of New Orleans. Speculating in an area where so many perished may seem macabre to some, but if you don't buy it, apparently, somebody else surely will. And, like it or not, that could be good news. Economic and housing market forecasts this week from Freddie Mac and National Association of Realtors indicate the housing sector could once again save the nation from deeper economic turmoil -- much as it has since the end of the dot com era. The very forces of nature that are putting a crimp in the national economy, are sending waves of booms through Gulf Coast housing markets hit hardest. Freddie Mac says September employment in the U.S. fell for the first time in May 2003, down by 35,000. With average monthly job gains at 194,000 since 2003, the storms washed out a net of about 200,000 jobs. But as retail, leisure, hospitality and even manufacturing industries shed jobs, construction jobs remained robust to handle an expected record level of new home construction in 2005. "The reconstruction efforts (in the Gulf Coast) will place additional upward pressure on construction material costs, (which) account for about one-third of the cost of a new home," Freddie Mac said. Home price appreciation, however, will help offset any sales dip. "Purchase-money lending should remain robust, as a dip in home sales will be largely offset by higher home values, thereby maintaining home-purchase originations," according to Freddie Mac's forecast. Housing demand from those misplaced in the Gulf Coast area (as many as 850,000 homes were damaged, destroyed or rendered inaccessible or uninhabitable) is converging with higher-interest-rate motivated buyers anxious to get into a home as well as a growing army of speculators. Those market forces, in part, have prompted NAR to change it's outlook from 2005 becoming the second best home sales year on record to 2005 becoming a record setting year. "Post-Katrina, our sales projections for this year have moved even higher. In addition to the housing needs of hurricane victims, we may be seeing some 'fence jumping' from home buyers who are getting into the market before interests rates move higher," said David Lereah, NAR's chief economist. Post-Katrina is no different from post-911, post-Hurricane Hugo, post-Loma Prieta. The economy takes a hit, but the real estate market just keeps on going. Disaster, it would appear, is good for real estate business. New Orleans was still submerged when LoopNet reported to the Wall Street Journal a 45 percent rise in investor inquiries for properties in Louisiana, Mississippi, and Alabama, as the displaced and investors alike swarmed major cities Shreveport, Baton Rouge, Hattiesburg, Houston and satellite towns. The attraction is particularly keen when tens of billions of dollars in federal funds and other assistance moves in to quickly rebuild an older area, especially when rebuilding comes with all the trappings of modern construction and its amenities. Also, developers had already begun to set down stakes in the Biloxi-Gulfport coastal region and are likely to stay put to reap even greater returns with much of the coastline structures washed out to sea. Natural and other disasters normally attract speculators looking to cash in on the spoils for better or for worse, but interest after Hurricane Katrina includes a continuation of a national real estate investment love-fest sparked by a lackluster stock market and booming real estate values. | 
