View Full Version : Katrina and Real Estate

09-06-2005, 10:48 AM
How would Katrina impact the real estate boom?

If you think it will burst the bubble, please indicate the specific causes and effects that will lead to it.

If you think it won't impact it adversely, please explain why.

09-06-2005, 02:52 PM
you could safely say there will be some new home purcahses once these displaced people receive their insurance money if their house is considered inhabitable.

09-06-2005, 09:34 PM
Hard to say. Need to know more about the numbers involved.

But, in general, destruction due to natural disasters and major wars is long-term negative for economic growth and inflationary.


Think of it this way. Homes represent money, labor, and materials invested in shelter. All those homes destroyed. Less wealth left in nation. Now more wealth, which could have been saved for emergencies or spent on education or defense must be spent on rebuilding homes. And 500,000 people who could have been working, cannot work or create wealth. If people were already on welfare, no change in working status, but huge increase in amount of aid other Americans need to provide.

So net drain on American wealth. Less wealth. Constant money supply. Increased prices. Plus Fed keeps interest rate constant or lowers interest rate to stimulate economy, long term inflationary of money supply and prices.

Imagine a country with 10 people. Every day they work. They pick 10 coconuts each. Say wealth created is 100 coconuts a day.

If 2 people killed and 3 homeless, then wealth creation now cut to 50 cononuts a day. Plus any coconuts saved must be spent on rebuilding homes.

So the only question is what percentage of the nation's wealth has been destroyed, and how much wealth creation is lost due to homelessness and lack of jobs, etc. Sounds like a big problem.

Same analysis with war. Some nations can profit if they suffer no military losses or war is not fought on their land.

But say German nation in WW II. Homes destroyed. Millions of Germans, Russians, French, etc. killed and no longer working. Billions of dollars spent on bullets, tanks, submarines, bombs, etc. intended solely to kill and destroy. Entire cities firebombed into ashes. Destructive of wealth. So inflationary long-term effects. Substantial reduction in supply of wealth and consumer goods for years. Granted reduction in demand too. But proportionate reduction in wealth creation far greater.

Everyone fighting. No one growing food.

Imagine two villages of 5 people. Each picks 10 coconuts a day. Wealth of two villages 100 coconuts.

Imagine war kills 3 people in each village and all huts destroyed. During war, solders cannot pick coconuts. And people at home who are not fighting war have to share their coconuts with soldiers to feed them. So everyone has less to eat.

Now net wealth is 40 coconuts. And the living people cannot even pick the 10 coconuts a day, because they have to spend time rebuilding destroyed homes, etc.

09-06-2005, 10:14 PM
BusinessWeek has an article analyzing economic effect.

I guess best approach is to analyze prior megastorms and see how damage seems to have affected U.S. economy.

But huge destruction of wealth and drain on economy would tend to burst bubble. But again it is a question of how big. Most real estate is very local. So impact would need to be huge to affect CA and NY economies.

09-06-2005, 10:51 PM
well it should affect it if gas prices stay this high for about another 1-2 months

09-08-2005, 01:15 AM
great article in NY Times about this this past weekend

article said it may in fact EXTEND the boom, at least in that area...all those ppl need homes

a lot of investors (according to the article) are moving in and buying up everything in sight in the area's around New Orleans on speculation

i'd be willing to take a road trip out there and get in on this if any investors are interested...

i got enuff for a couple of down payments, a car, a degree and time...PM me or wfdean@hotmail.com or aim mclgaucho

09-08-2005, 08:51 AM
I disagree, sure there is plenty of supply, but where will the demand be, now of course prime areas like downtown will hold their values but the outlying areas value i believe will not go up and maybe down. 1st reason is the employment factor, the area will not be fully employed for quite sometime(hard to pay rent/mortgage without a job), along with many employers that can move will move as they would not want to risk losing their business again(if I was a business owner that wasn't location dependent i would move after this). 2nd is the flight factor sure many people will stay but many also will leave if they have the means to as to not put their families at risk again(leaving the people that stay are people that are employable and want to stay, and people that are not employable and can't leave). Another thing is the geological aspect as I don't know about geology, but there could be deep damage to the soil if the water is not removed after considerable time(they are saying it could take months for it to recede) which could add 5k or so to the cost of the house for the testing and removing/replacing of the soil on the lot. Do you have a link to that article btw?

09-08-2005, 01:01 PM
Are you an investor? I was contacted by an investor yesterday about possibly looking into the area. I might be interested in having you take a look if you've got experience doing it.

09-09-2005, 03:31 AM
while i am not familiar with the dynamics of the Houston real estate market, i can say the metro Houston area will likely reap the lions share of good fortune. You dont need to think about people relocationg, you need to think about businesses relocating....think major corporations with large presence in NO....the logical move is Houston, particularly energy companies, which are some major CBD tenants in NO.

Also, Katrina is likely to extend the boom b/c the cost of new home construction will rise throughout the country ( prob. more pronounced in SE and TX)as the American contractor force, which is already spread thin b/c of recent real estate boom, will be stressed further by gargantan rebuilding in next couple years. And, higher energy prices run up price of labor and materials. Not to mention material prices will spike when large quantities are deverted to rebuild NO....think buying plywood anytime after US entered IRAQ, we sent over like a million sheets of GP, and price skyrocketed overnight and hasnt come down since.

Ray Zee
09-12-2005, 02:37 PM
why take the time to write a good post and then put a bunch of abbreviations that most may not know what they are and are integeral to the understanding of what you write.

09-12-2005, 04:52 PM
a bunch of abbreviations...

[/ QUOTE ]

This should help...

NO = New Orleans
CBD = Central Business District
b/c = because
SE = Southeast
TX = Texas
US = United States
GP = Georgia Pacific (plywood)

09-16-2005, 01:54 AM
good point, I should have taken more time to spell all of them out. my bad. FWIW Sniper has them all correct.

edit: i knew there was some reason i like Sniper's posts. Finally, someone who understands me! j/k lol.

09-16-2005, 09:10 AM
edit: i knew there was some reason i like Sniper's posts. Finally, someone who understands me! j/k lol.

[/ QUOTE ]

Thanks! (I think) /images/graemlins/smile.gif

09-16-2005, 12:49 PM

OUSTON, Sept. 15 - Fewer than half of all New Orleans evacuees living in emergency shelters here said they will move back home, while two-thirds of those who want to relocate planned to settle permanently in the Houston area, according to a survey by The Washington Post, the Henry J. Kaiser Family Foundation and the Harvard School of Public Health.