Last year's gulf coast hurricanes displaced upward of 1 million people, many of whom sought temporary shelter in Baton Rouge, La., and Houston. As the months have passed and uncertainty about rebuilding on the coast remains, thousands are choosing to stay put, creating a new surge in demand for housing in those markets.
A recent report from the Office of Federal Housing Enterprise Oversight (OFHEO) on home price appreciation in South Florida in the aftermath of Hurricane Andrew, which hit Miami-Dade County in August 1992, suggests those cities may have something to learn from the past. According to OFHEO, “anecdotal indications [offer] that, at least for some less-affected communities, the influx of displaced citizens may elevate prices significantly.” Prices in areas affected by Andrew grew 5 to 6 percentage points in the 20 months after the hurricane before rates of appreciation retreated to pre-hurricane levels.
In Baton Rouge, the peak came in the first weeks after Hurricane Katrina struck. The area had about four months of for-sale inventory in August, which plummeted to one month in September and increased to three months in October, according to the Greater Baton Rouge Association of Realtors. The average price of homes sold hit $188,151 in September, up from $168,882 in August and $149,165 in September 2004. Ken Damann, a spokesperson for the association, says the growth likely reflects higher-priced homes that sold more quickly than they otherwise would have.
But some potential home buyers in Baton Rouge have been delayed by the processing of their insurance claims. For that reason, says Steve Baker, sales manager of United-Bilt Homes, many potential customers won't be in a position to buy for a few more months. The company is an on-your-lot builder, and Baker says he's seen the price of land increase dramatically.
Home prices are rising in Houston, too. But builders there say increases are due less to demand—the local HBA estimates that between 2,500 and 5,000 evacuated families are in the market for new homes—than they are to shortages of labor and key supplies.
Shawn Speer, Houston division president of Royce Homes, says uncertainty about the future has slowed some potential buyers, but other evacuees are buying now—many opting for spec homes that are nearly complete—before prices increase even further. “Anybody who buys now will see a return on their investment,” Speer says. “There's no end in sight for prices returning to their pre-hurricane levels.”