Katrina Impacts Home Prices

According to the National Association of Realtors, with inventory of homes available for sale across the country so tight anyway, rebuilding the Gulf Coast will place additional pressure on all home prices.

"New home prices will be immediately impacted because of increased construction costs," says NAR economist Lawrence Yun, "and that will filter down to existing home prices as well." That's because as new house prices rise, more homebuyers will consider existing homes, increasing the demand (and prices) for them.

Home sales have already spiked, as has rental demand, in regions surrounding the disaster zone in the Gulf Coast, according to NAR.

Michael Carliner, economist with the National Association of Home Builders, points to increased housing demand in Baton Rouge and Houston, which pre-Katrina, had a large inventory of vacant rental housing. Much of that has now been snapped up, he said.

In Baton Rouge, evacuees have bid up property values by up to 30 percent in just the last week or two. (See that story here.)

But it isn't just a Katrina effect. With home prices having gained so much in the past few years, skeptics have been waiting for what they consider to be an inevitable slowdown, and were quick to point to sluggish activity over the summer.

Those skeptics are still worried, but for the time being, there already are signs that the rally is picking up where it left off.

Florida remains strong
Katrina has had little effect on neighboring Florida markets, except for a trickle of hurricane evacuees in the panhandle area. Some businesses have also temporarily relocated to Tampa and other Florida towns, putting a little more pressure on markets.

Overall though, Sunshine State markets have continued strong and high prices are transforming landscapes. As single-family home costs have exceeded affordability for many Floridians, condo sales have boomed.

That has, in turn, affected the rental market -- investors are snapping up apartment buildings for condo conversion and sending their prices climbing.

Posted by Donald Urschalitz P.A. at September 14, 2005 02:43 AM