Hunting For Bargains in Hurricane Central

Almost a year ago, Hurricane Katrina devastated the U.S. Gulf Coast with winds of up to 175 mph, leaving in its wake $81.2 billion in damage, 1,800 dead, and hundreds of thousands more displaced.

At the peak of yet another hurricane season in the southern U.S., and with the scars of Katrina still fresh, it would seem that most sensible people would think twice about living on the Gulf Coast. Only it happens to be one of the most beautiful, and affordable, coasts in the country, one where much of the population has deep roots.

Moreover, many developers and private individuals are buying there hoping to take advantage of the billions of dollars in federal and state aid, as well as the money from casino operators and private-sector investors. As the cash comes in to rebuild and, in many cases, improve the area, much of the new construction is for second homes in hard-hit areas.

As a result, home prices in many areas in the region are higher than first projected, and the housing market is bouncing back sooner than expected. In spite of myriad storms and ever-increasing home insurance premiums, if there were there any deals immediately after Katrina, they aren’t there now.

SURGING SALES

This pattern should come as no surprise to people familiar with the South Florida real estate market. Despite getting regularly walloped by natural disasters, the Sunshine State still boasts some of the priciest property in the country, especially on and near its extremely vulnerable coastline. The

After a disaster, the market generally takes 18 months to recover, says John T. Reed, editor of Real Estate Investor’s Monthly, and author and publisher of books on real estate investing.

“A disaster turns an area into a leper whom people are shunning. But if you look closely why people are shunning, you’ll see if reasons are invalid, like ‘I don’t want to live in California because there are earthquakes,’ or correctable, like lifting houses up on stilts or reinforcing buildings,” he said.

At present, sales are brisk, especially in cities like New Orleans, Biloxi, Miss., and Galveston, Tex. According to a study conducted by the University of New Orleans, home prices in the Crescent City climbed 10 percent for the first quarter of 2006, and more than 40 percent in the most desirable areas.

The study also found that for the first three months of 2006, the price of average single-family homes rose to $215,179, up from $195,377 in the first eight months of 2005.

Home sales in states such as Alabama and Mississippi, both of which got drilled by the storm, are also doing better than the country as a whole, post-Katrina. Both condo units and regular homes are seeing significant gains. Mobile, Ala., house prices appreciated an average of 14.9 percent and Galveston’s 9.7 percent.

“There’s a general trend in the Southeast region where home sales are rising while the rest of the country’s sales are declining, because the region is very affordable,” said Lawrence Yun, an economist with the National Association of Realtors.

SO MUCH DEPENDS ON THE WEATHER

In pricier areas of Florida and across the southeast, condos are popping up, and houses in the historic districts are being sold. Eric Bouler, a Prudential Gardner agent in New Orleans, is working on a new condo project with homes ranging from $250,000 to $500,000. Many second-home buyers and people changing their lifestyle are being targeted.

This doesn’t mean the market has peaked along the Gulf Coast. Many of the potential investors seeking bargains are still waiting to see if the 2006 hurricane season will be a reprise of 2005. Even if not, the infrastructure (not to mention the psyche) of the region could be damaged by a storm less fierce than Katrina.

“Certainly the storm size and intensity of Katrina is extremely unlikely this year,” Ken Reeves, Director of Forecast Operations for AccuWeather, said.

Even as Florida home mortgage rates rise, if the Gulf Coast region emerges with relatively little damage this year, prices will continue to surge up and up. If it’s a bad season, however, prices will plummet. For those with fortitude and financial wherewithal, that could represent one of the best buying opportunities the region has seen in decades.