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Speculators Pour Into New Orleans

One of the issues that I've been discussing with Paul is the microeconomic impact of Hurricane Katrina on middle class homeowners in New Orleans. One thing that could really hurt the region is the loss of equity for homeowners whose dwelling were not destroyed by the storm. Imagine you own a home in the New Orleans area that is (with some repairs) completely habitable. Those homeowners probably have a large majority of their net worth tied up in home equity. A crash in real estate values (which seemed likely) would have dealt an second blow to those folks - the kind of loss not covered by disaster assistance.

The Los Angeles Times reports that real estate values are, if anything, rising.

BATON ROUGE, La. (LA Times) - Brandy Farris is house hunting in New Orleans.

The real estate agent has $10 million in the bank, wired by an investor who has instructed her to scoop up houses any houses. "Flooding no problem," Farris' newspaper ads advise.

Her backer is a Miami businessman who specializes in buying storm-ravaged property at a deep discount, something that has paid dividends in hurricane-prone Florida. But he may have a harder time finding bargains this time around.

In some ways, Hurricane Katrina seems to have taken a vibrant real estate market and made it hotter. Large sections of the city are underwater, but that's only increasing the demand for dry houses. And in flooded areas, speculators are trying to buy properties on the cheap, hoping that the redevelopment of New Orleans will start a boom.

This is good news for homeowners who intend to permanently relocate to places like Baton Rouge, Houston, Memphis, etc.

Why is the market so optimistic?

These eager would-be buyers may be drawing their inspiration from Lower Manhattan, which proved a bonanza for those smart enough to buy condos there immediately after the Sept. 11 attack.

Of course, in southern Louisiana, everything is hypothetical for the moment. The storm destroyed many property records and displaced buyers, sellers, agents and title firms, so no deals are actually being done. Insurance companies haven't started to settle claims yet, much less determine how, or whether, they will insure New Orleans in the future. The city hasn't even been drained.

But people are thinking ahead, influenced by a single factor: the belief that hundreds of billions of dollars in government aid is going to create a boomtown. The people administering that aid will need somewhere to live, as will those doing the rebuilding. So will employees of companies lured back to the area, and the service people that attend to them.

All this will lead to what Sterbcow delicately calls a "reorientation" of the city.

Unfortunately they won't be "reorienting" the city to sit above sea level...


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Comments (15)

I wonder if they could dred... (Below threshold)
joe:

I wonder if they could dredge up enough silt somewhere to raise New Orleans, even a little.

I suppose it would be a lot easier to raise the levees and strengthen them, though.

oh, man. That just flashed... (Below threshold)
Sarah:

oh, man. That just flashed me back to when I used to have to go do title searches. That office is downtown on the first floor, IIRC. I bet all those title books are flooded out.

Damn Carpet Baggers!... (Below threshold)
roux:

Damn Carpet Baggers!

Hmmmm.With people ... (Below threshold)
ed:

Hmmmm.

With people talking about $200+ billion, I think things are getting way out of hand here. It's a terrible thing that the levees broke, but this isn't something that happened out of the blue and everyone who owned a house protected by those very same levees elected the same officials that diverted levee construction money to other uses.

Frankly I think it's a pretty hopeless cause for this fiscal conservative. It's a pretty safe bet that republicans will try to buy as much goodwill as they can with federal money, so there goes the whole small-government thing right into the crapper. At least before there was the dubious fiction that the GWOT was responsible for the excesses, but that's definitely been cast aside.

My decision to not vote republican in 2006 and 2008 is looking better than ever.

Why use silt? Useless democ... (Below threshold)
Ikkonoishi:

Why use silt? Useless democrats are cheaper and easier to relocate. Just stage an anti-Bush protest in NO, and pave over them once the crowd gets big enough.

Good christian values, lkk.... (Below threshold)
jay:

Good christian values, lkk.

The highest point in Louisi... (Below threshold)
tyree:

The highest point in Louisiana is about 60 ft. above sea level. If I remember correctly even that is still below river level, as the Mississippi has to be above the sea to flow into it. Raising all parts of the city above all possible flood levels from lakeside or riverside would be very, very difficult and expensive. The environmental impact reports alone would take years to approve. If we can an aggreement from the ecology people we might be able to do it more economically than building 125 miles of levee to Cat 5 hurricane height. I am waiting for the Army Corps of Engineers to come up with their recommendations.
Something that I haven't heard anyone from the MSM talk about is that the basic levee system was created by nature. Flood waters deposited mud and silt along the banks and often the highest local land is near the river.
As far as politics are concerned, I am predicting that Louisiana will go more to the right. The corruption in New Orleans is legendary, and the Democrats haven't cleaned it up in 50 years.

See, this is the problem wi... (Below threshold)
kbiel:

See, this is the problem with a free market economy, people can make a profit on any thing! And to think, both seller and buyer could be benefiting from this market activity, scandalous! The government should be regulating this so that there is not too much market activity. Static, stagnant markets are the only safe markets, look at Europe.

My guess New Orleans will b... (Below threshold)
John S.:

My guess New Orleans will be rebuilt as a resort town full of brand new $1 million houses owned by rich white people. Poor blacks and Democrat politicians need not apply.

In 1983, a hurricane hit my... (Below threshold)
Hornet:

In 1983, a hurricane hit my town and all of the smart people were predicting that the real estate market, both sale prices and volume of sales, would either be stagnant or would decline sharply. They were wrong. The real estate market took off and stayed hot for several years.

The same is happening in NOLA.

Kevin, was that Speculat... (Below threshold)
PTG:

Kevin, was that Speculators or Peculators pouring into New Orleans?

Bring on the Government Tit... (Below threshold)
Les Nessman:

Bring on the Government Tit and let the sucking begin!
Why should anyone ever buy insurance anymore? Or think carefully about where they locate their buildings? Or care about what their community does to protect itself?

Why bother? The government will pay for everything.
/hyperbole off (but true nevertheless)

what a pack of fucking vult... (Below threshold)
waldo:

what a pack of fucking vultures

That's right guys, y... (Below threshold)
B Moe:


That's right guys, you're only allowed to profit politically from disasters, God forbid anyone to profit monetarily.

LMFAO, dependable as the sunrise, Waldo

Everyone who owns(ed) prope... (Below threshold)
Carol:

Everyone who owns(ed) property in any of the flooded gulf areas, beware of buyers. Check Google searches for how Florida Gov. JEB Bush made his fortune--real estate in Miami after Hurricane Andrew. Look for Key words Codina-Bush Real Estate or more recently St. Joe's Company. www.thirdworldtraveler.com/politiciansBush_Family_Business by Stepen Pizzo Mother Jones magazine, Sept 1,1992. Andrew hit Miami August 24, 1992. In March 1, 1995, individual apartments/condos on the beach were selling for $500K-1.5million each (in a 204 unit building...do the math). Guess who profits? The land buyer. None of the $250,000 Homestead residents who lost their homes benefited from the profit gains. Moreover, the Bush brothes have committed millions of federal and state dollars to the S. Joe's Company (they own 3% of Florida), despite questioning about who will benefit...St. Joe's. In 1997 St. Joe Co. bought 1/3 Codina Group. Bush started Codrina Group in 1981. Let's see who buys land cheap in New Orleans and the gulf coast. Look for names like Alvah Chapman, Armando Codrino, Pike Rawley,Hoffman, J. Edward Houston, and friends of Senator Bob Martinez.




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