Post-Katrina real estate booming

updated 11:27 p.m. ET May 9, 2006

NEW ORLEANS - The 2,200-square-foot house promises three spacious bedrooms and two-and-a-half baths — a bargain at $175,000. Except for the fact that the home, located in one of this city’s previously elegant neighborhoods, has been gutted to the studs and has no drywall, no wallboard, no fixtures.

“Home was flooded by Katrina,” reads the advertisement posted by the listing agent at one of the city’s largest real estate firms. “Ready to turn into your dream home.”

The pitch is less far-fetched than it may seem: Although vast swaths of this hurricane-battered city are still without electricity and basic services, residential real estate sales are at a fever pitch, a shining spot in an otherwise struggling economy.

For the first quarter of the year, sales of single-family homes in the greater New Orleans area zoomed to $826 million, a jump of 60 percent over the first quarter of 2005, when sales totaled $517 million, according to New Orleans Metropolitan Association of Realtors; 3,829 residential units were sold, 960 more than the same period in 2005.

Experts say there’s nothing to be surprised about: One of the ironies of natural disasters is they’re often good for real estate. It’s a pattern real estate professionals witnessed in Florida after Hurricane Andrew and in Los Angeles in the aftermath of the Northridge earthquake.

“To use a terrible analogy, it’s like watching ’Gone with the Wind’ for the fifth time,” said Arthur Sterbcow, president of Latter & Blum Inc., the 90-year-old real estate firm based in New Orleans. “It’s completely predictable. The market reacts the same way each time. It’s like watching a football game and having the play book in your hands.”

Last year’s play unfolded like this: As Hurricane Katrina bore down in late August, thousands fled.

Trying to stay close to home, many ended up putting down temporary roots in satellite communities like Baton Rouge, where evacuees pushed up residential sales 48 percent to $1.2 billion in 2005, compared to $788 million in 2004, according to the Greater Baton Rouge Association of Realtors.

But the pull of home is strong, and many evacuees have since returned to their flooded city.

Some were lucky enough to find their homes intact, needing only minor repairs. At the other end of the spectrum were people like Jim Peckenpaugh, 60, whose home in the upper-middle-class Lakeview neighborhood took on 9 feet of water.

He initially tried to find a dry house, but those in Lakeview were selling for more than $400,000, pricing him out of his own neighborhood. Instead, he found a bargain: a three-bedroom, also in Lakeview, selling for $250,000. That’s because it swallowed only 3 inches of water.

It wasn’t his first choice — the first flooded house he tried to buy was snatched up by a more aggressive buyer. “At night, as I was driving around looking at houses, I would see people with flashlights doing the same thing,” he said.

Most returning homeowners bought dry properties in the unharmed periphery of the city.

As those homes became scarce, more intrepid homeowners, as well as investors, began working their way toward the core of the city, say real estate agents and developers. National homebuilder KB Home has acquired 58 finished lots in New Orleans, as well as a 3,000-acre parcel in Jefferson Parish, a neighboring suburb.

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