Housing Boom May Continue After Storm, Experts Say
- From: "lkgeo1" <lkgeo1@xxxxxxx>
- Date: 5 Sep 2005 04:48:29 -0700
Housing Boom May Continue After Storm, Experts Say
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By MOTOKO RICH
Published: September 5, 2005
Hurricane Katrina destroyed hundreds of thousands of homes, threw at
least a million people out of work, disrupted supply lines for
businesses and brought misery to untold numbers. Will it also put an
end to the housing boom?
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Bruce Ackerman/Star-Banner
Hurricane Katrina destroyed thousands of homes in the Gulf region.
There are good reasons to think so: the storm has led to rising oil
prices and shortages of building materials, and is likely to shake
consumer confidence. But most experts think the housing market's
five-year run still has a way to go before it peters out.
In a weird twist of fate, the storm could even extend the housing boom,
which in recent weeks had seemed to be running out of steam. That is
certainly true in places like Houston, Atlanta and Baton Rouge, La.,
which are experiencing a surge in rental and homebuying activity as a
result of the storm and the exodus that followed.
As refugees from New Orleans poured into Baton Rouge last week, along
with workers who expect to help with the rebuilding effort along the
Gulf Coast, the local housing market, which up until now has plodded
along at a stable pace, suddenly experienced the kind of frenzy that
has been associated with New York, Miami or Silicon Valley in the last
few years.
"I've never seen anything like this before," said Robert Cook, a real
estate agent with Re/Max Elite in Denham Springs, La., a suburb of
Baton Rouge. "It's sort of scary."
Mr. Cook said he represented five buyers in two days last week who made
offers on homes, and fielded hundreds of calls and e-mail messages from
others. On Friday, he said, he was with a couple from Picayune, Miss.,
who made offers on several houses only to discover they had already
been sold.
In addition to refugees and workers, he said, "investors are coming in
from out of state by the droves and trying to buy stuff."
Housing markets well outside the immediate path of the refugees may
also experience effects from the hurricane. Last week, mortgage rates,
which had been creeping up in recent weeks, fell by about a quarter of
a percentage point. Some economists said the rates had responded to
indications that the Federal Reserve may now raise interest rates less
aggressively because of concerns that rising oil prices will weaken the
broader economy.
Ellen Bitton, who owns Park Avenue Mortgage Group, a mortgage lender
and broker in New York and Palm Beach, Fla., said she expected buyers
to rush this week to take advantage of the lower rates.
"Whether or not this is going to be a blip in the market, nobody
knows," she said. "It's almost an unexpected window of opportunity for
people who want to lock into a better rate."
But some economists said the lowered mortgage rates were unlikely to
offset other factors that pointed to a cooling housing market before
Katrina hit.
"I don't want to get too carried away by a 25-basis point move," said
David Rosenberg, chief North American economist at Merrill Lynch,
referring to the drop in rates (a basis point is one-hundredth of a
percent). With inventories of available houses and condos rising in the
markets "where a lot of the effervescence was concentrated," he said,
as well as declining mortgage applications, "that is telling me that
the housing boom is basically over."
Rising oil prices could put a crimp in the housing market if they
prompt companies to slow hiring, or, perhaps more crucially, set off a
psychological resistance to homebuying.
On a practical level, higher prices at the pump may give some buyers
pause about driving long distances to look at houses. Doug Fenichel,
spokesman for K. Hovnanian Homes, a home builder in Edison, N.J., said
the company was concerned about "how willing is someone to jump into a
car to take a drive for a couple of hours just to go look at a house."
The company, which has several new developments in central New Jersey,
has been drawing buyers from all over the state. Now it is considering
offering incentives to people who will "take a ride from northern New
Jersey to central New Jersey to see a home."
The hurricane is also likely to drive up the cost of new construction.
Last week, home builders were closely watching prices and supplies of
building materials like cement, plywood and roof tiles. The ports in
New Orleans and Mobile, Ala., which were closed last week, brought in
about 12 percent of all cement imports, said Michael Carliner, an
economist at the National Association of Home Builders.
Plywood prices spiked by about 20 percent last week, a result of
disrupted production in the hurricane-ravaged region, said Jon P.
Anderson, publisher of the industry newsletter Random Lengths.
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