More Twists Than a Mardi Gras Parade
Published in The New York Times
November 13, 2005
Assessing the New Orleans real estate market after Katrina
By FRED A. BERNSTEIN
Published: November 13, 2005
PETER SCHMIDT, a property manager in New Orleans, is one of the lucky ones.
His condo, in an 1870 building in the French Quarter, was undamaged when Hurricane Katrina struck on Aug. 29. So when he decided to list the 600-square-foot unit for sale in late October - after taking a job in California - he set the price at $299,000, nearly double what he would have asked before the hurricane. After all, Mr. Schmidt said, thousands of people in New Orleans are looking for places to live, and he had been hearing that homes in good condition were commanding a premium.
Undamaged homes in desirable areas like the Garden District rose in value.
Last week, Mr. Schmidt, who is advertising the condo on the Craigslist Web site to avoid paying a broker's fee, had not received any offers, and he was considering lowering the price. "Not everything I heard about the real estate market was true," he said.
Real estate in New Orleans after Hurricane Katrina has taken more turns than a Mardi Gras parade. With property records unavailable for more than two months, almost no homes have changed hands. But the market for rumors is hot.
At the same time, hundreds of deals have been signed, brokers say, giving them a chance to take stock of the market. So far, they say, predictions that real estate prices would plummet - like predictions that prices in New York City would drop precipitously after the Sept. 11, 2001, terrorist attacks - have not come true.
In fact, brokers say, many New Orleans houses are commanding higher-than-pre-Katrina prices, largely because of a shortage of habitable dwellings. True, the speculation that occurred in nearby cities like Baton Rouge (where prices shot up as much as 30 percent after the storm) hasn't come to New Orleans.
But undamaged homes in desirable neighborhoods are bringing in 5 to 10 percent more than they did in August before the hurricane hit, according to Arthur Sterbcow, president of Latter & Blum Realtors, the city's oldest real estate brokerage firm.
At the same time, in parts of the city devastated by the storm, no one is making offers yet, brokers say, while attendance at open houses is way down.
In real estate offices, "everybody's happy one day and miserable the next," said Angela Murtagh, a Latter & Blum agent. "It's a roller coaster of emotions."
But the market was complicated even before the hurricane. "This is a city where you can have a house sell for $1.5 million, and a block away, houses are going for $50,000," Ms. Murtagh said. Katrina simply widened the gaps.
Exactly where the numbers will end up is anybody's guess. Until last week, there was no way to conduct a real estate closing in New Orleans. The city's 12 million pages of mortgage and property records had been rescued from the basement of Orleans Parish Civil District Court, not soaked, but moist.
To save the records from mold and mildew, the city hired Munters, a Swedish firm, to freeze dry the pages in refrigerator trucks. Munters hauled the records to Boston to complete the drying process.
In October, the company began taking the documents back. They are now on metal shelving in the Ernest N. Morial Convention Center, temporary headquarters for the city's Recorder of Mortgages, the Register of Conveyances and the Custodian of Archives. The last truck is expected in New Orleans on Wednesday. But the system for searching the records remains rudimentary. Last week, Mr. Sterbcow's company delivered five computers to the convention center to help city employees conduct title searches.
Now, with closings resuming, real estate agents are looking to the future. "There are a lot of buyers and a lot of sellers," said Crystal Berry, an agent with Re/Max New Orleans Properties. Thousands of children who had enrolled in schools outside the city will be back in New Orleans in January, Ms. Berry said, giving their parents a deadline to find housing.
That explains why in suburbs like Mandeville, on the north shore of Lake Pontchartrain, prices are up significantly from last summer, according to Mr. Sterbcow. "Show me a place with good schools, and I'll show you a market that's going gangbusters," he said.
Isabel Reynolds, a broker with Prudential Gardner Realtors in New Orleans, said she sold a house last week in River Ridge, a suburban section of Jefferson Parish, which is across the river from downtown New Orleans, for more than it would have brought before the hurricane.
"The buyers were homeless," she said. They had lived in New Orleans, "right near the 17th Street Canal, exactly where the levee broke; she swam to her neighbor's house," Ms. Reynolds said of the wife.
"Her husband, a doctor who was on call, thought she was dead." she said. "Everything they own is gone."
With so many people displaced, some sellers have tried to wiggle out of contracts signed before Hurricane Katrina. "You'd think, after the storm, buyers would want to get out of them," Mr. Sterbcow said. "But it's sellers who are trying to get out of deals, because they think they can get more now."
Muriel Cassibry, an agent with Latter & Blum, said she has priced new listings at pre-Katrina levels, on principle. Ms. Cassibry, who has sold real estate in New Orleans for nearly 40 years, said, "It's the right thing to do." Ms. Cassibry said she put one house in the West Shore neighborhood on the market for around $300,000 on a Sunday in October, and it was sold within two days. The price, based on pre-Katrina comparables, "was fair," she said.
The fact that prices haven't dropped does not surprise her. "New Orleans is just a wonderful place to live," she said. Still, Ms. Cassibry's daughter and business partner, Cathryn Cassibry, left for New York after her house was flooded and her husband, a lawyer, was offered a job in Manhattan.
Departures are not unusual, and because of that, Ms. Reynolds wonders how long prices will stay up. "You have an entire upper class living elsewhere so their kids can go to school," she said. "Some will come back, and some will not come back."
The biggest wild card is whether the government will pay to build a levee system that can withstand a Category 5 storm. That would give neighborhoods flooded by Katrina a chance to rebuild, raising prices in those areas, and helping bring the city back to normal.