Investors Lead Home Sale Boom in New Orleans

NEW ORLEANS, July 8 — In a market spurred by speculators and bargain hunters, an extraordinarily large number of houses in the flood-ravaged metropolitan area here are being sold, according to real estate analysts, who say volume and sales prices exceed levels before Hurricane Katrina.



The higher prices are largely due to an increase in value in suburban areas, many of which were not heavily flooded, or in dry areas of New Orleans. But flooded houses in the city are being bought as well, often at deep discounts of as much as $50 a square foot less than they would have sold for before the hurricane. "We have a stronger housing market than before," said Wade R. Ragas, professor emeritus of finance at the University of New Orleans and the president of a local consulting firm, Real Property Associates.



"There is renovation activity in every ZIP code of Orleans Parish," Dr. Ragas added, "but the strongest buying activity is, in general, closest to where it did not flood or where there was under two feet of water."



Across the nine-parish region that includes New Orleans, 7,506 single-family homes were sold between January and the end of last month, compared with 6,449 in the same period last year, according to statistics from the New Orleans Metropolitan Association of Realtors and the Gulf South Real Estate Information Network. The average price so far this year is $221,244, compared with $193,097 in the same period last year.



The interest in buying, selling and renovating has been a bright spot since the last months of 2005, and has confounded some people who thought the flooding would cripple the housing market for years. But it is just one of many counterintuitive contrasts that are defining the area and making easy predictions unreliable.



Before the storm, Jennifer and Rodney Greenup lived in the Gentilly neighborhood of New Orleans, in a 1950's-era, 2,600-square-foot house with a red tile roof that they bought nine years ago for $108,000. It was appraised for nearly $240,000 before Hurricane Katrina.



But after the storm, when the levees broke, Gentilly was inundated, and the house sat in deep, murky water for weeks.



It sold after just two weeks on the market in February for $110,000. The house had been gutted and still lacks walls, floors, appliances and other standard fixtures.



"We didn't think we'd be able to get anything remotely normal when we decided to sell it," said Ms. Greenup, a pharmacist. "We just wanted to do all right and would have been happy to get 80 grand."



The buyer was a firefighter who said he had admired the house for years and planned to fix it up and live in it.



Kim and Reginald Glass are among the local investors betting on flood-ruined areas like Gentilly, which was a solidly middle-class neighborhood north of downtown toward Lake Pontchartrain. They have bought eight damaged houses for prices from $50,000 to $112,000, which Ms. Glass says probably represents about half the houses' market value before the storm.



"We had too much invested in New Orleans to walk away," said Ms. Glass, a lawyer who grew up in Gentilly. "We needed to figure out a way to stay here and make a living. So we decided to purchase properties in Gentilly. We looked to purchase any property that had potential, in hope of being able to renovate and rent. I think we're going to try the rental market, because there are so many people looking to come back."



The home the Glass family lived in had flood damage, and a house they were building on the lakeshore suffered wind damage. Undaunted, they returned to the city as early as possible, in October, and got to work.



"The biggest problem has been getting things like cabinets and appliances in," Ms. Glass said. "It's been quite an experience. But we knew that we were coming back to fight."



For-sale signs are everywhere, even in neighborhoods that feel dead. Some flood-ruined areas are still foul-smelling and dirty, while other neighborhoods are vibrant and clean. Some areas still have looting and other crimes, while many neighborhoods are generally safe, and tourists roam the French Quarter with drinks in hand.



Though billions of dollars in federal housing aid will begin pouring into the city this fall, there is no clear vision for renovating vast parts of the area, and some experts say speculators are taking a significant risk. In addition, there has been a 20 percent increase in the cost of construction materials, and the city continues to have a shortage of workers, experts say.



"We don't know how things will pan out," said Ivan J. Miestchovich Jr., director of the Real Estate Market Data Center and the Center for Economic Development, both at the University of New Orleans. "There's a readjustment period right now. I think there's still a big question mark."



Amy Liu, deputy director of the Metropolitan Policy Program at the Brookings Institution in Washington, which is studying the post-storm recovery, said she was stunned by the number of houses on the market, but like Dr. Miestchovich was not sure what to make of it.



"What it means to us is that people are finally making decisions," Ms. Liu said. "If people are choosing to leave, that could be a bad thing. But if inventory is moving, then that's a good thing. To us, this is part of the natural churning that has to happen."



If much of the movement is being driven by speculators, that is not necessarily bad either, Ms. Liu said.



"If there are folks who are not financially able to clean up their homes," she said, "it is much better to have someone buy it than have it be abandoned and foreclosed."



Some sectors of the economy, of course, depend on optimism to survive, particularly real estate. Dee Luscy, president of the New Orleans Metropolitan Association of Realtors, said she thought the fear about the future was beginning to lift around the region.



"I think in the beginning people were afraid," Ms. Luscy said. "A lot of people thought, 'We'll never be able to give this stuff away.' Now we're seeing that things are selling. I think people are over the initial shock and are starting to feel O.K. about going on with life. What happened was like death. You go through stages of grief."



Vicki Shreves sold her gutted, 1,600-square-foot house in the Uptown section of New Orleans without putting up a for-sale sign. A friend of the family visited the house, on a street that had eight feet of water, "and wanted to know if we wanted to sell it," Ms. Shreves said. "It just seemed like such an easy thing, we said fine."



To Ms. Shreves, an accountant, the thought of rebuilding was depressing, and mold was a concern. But she had not decided to sell when she and her husband got the offer, which was close to $100 a square foot.



Before the storm, she said, she probably could have sold the house for $330,000. "When the storm came and obliterated it," she said, "we were happy to get $150,000."



"We got a check right there and closed the sale," she added.



Beth Amadon bought a flooded house in a neighborhood near Lake Pontchartrain for about 50 percent of its prestorm value of more than $600,000. Ms. Amadon knows what the houses are worth because she put in an offer on a different house in the same neighborhood just days before Hurricane Katrina.



"After the storm we couldn't get back to the city, so we agreed to walk away from that sale," she said. "That's how we ended up buying a different house."



In addition, Ms. Amadon sold several distressed properties that she and her husband, a real estate developer, had owned in the Tremé area near the French Quarter for about 20 percent more than they would have expected before the hurricane. The buyer was a resident who said he intended to rent the houses.



"People seem anxious to buy historically relevant houses close to the French Quarter," Ms. Amadon said. "It's been an interesting year."



Joan Farabaugh, a real estate agent in New Orleans, said she had earned as much income in the past six months as she did in all of last year.



"And I have as much business with nonflooded as flooded" houses, Ms. Farabaugh said. "Most of my sales are people who are locals, buying and fixing up."



She said she believed that her clients had faith in the future.



"They feel that what happened was unusual, and they don't feel that this will happen again," she said of the levee breaches and catastrophic flooding. "They feel they will be fine."



http://www.nytimes.com/2006/07/09/us/09orleans.html?hp&ex=1152417600&en=c87641ac61f830d8&ei=5094&partner=homepage