With the housing stock severely diminished and an uncertain percentage of displaced citizens not planning to return, levels of both supply and demand clearly have dropped. But how much? Only time will tell, industry figures say. But in the short term, rental prices have jumped by at least 25 percent, homes in unflooded areas boast property values far above their pre-Katrina worths, and flood-damaged homes are selling for fractions of their original values.
Such difficult-to-track trends have created a market that Adrian Pappalardo describes as "dynamic."
"Supply and demand is the rule that dictates everything right now," says Pappalardo, whose firm, Pappalardo Consultants Inc., has operated as a full-service brokerage in Lakeview for 30 years.
"If you're looking for a house that's livable, that didn't sustain any damage, then that's a pretty tight market," Pappalardo says. "Those are the most desirable of homes, the ones that don't require renovation. But there are so many flooded homes, if you're looking for a bargain price, you'll find it, because there is such a supply of flooded homes."
The supply-and-demand principle, of course, extends to the leasing market as well. "Property owners are asking for prices above and beyond what they were before the storm, and they're getting them," Pappalardo says. "If they're asking $3,000 for a one-bedroom, and the phone rings off the hook with people wanting it, the price will stay there. But when supply opens up, the demand will drop, and then the phone will stop ringing as much, and then the price will drop. It's eventually going to level off."
Beyond the foreseen stabilization of the supply-and-demand seesaw, Pappalardo points out two other factors that currently have large impacts on the market: fears about what this hurricane season will bring, and how the $4.2 billion allotted for home-owners' assistance will be distributed.
Potential homebuyers and sellers waiting out the current hurricane season before making a real estate transaction "is the buzz on the street right now."
"Everybody seems to say they just want to get through this hurricane season, and that after that, everything is going to be fine," Pappalardo says. "That doesn't make sense to me; it's an investment like 'I'm going to buy a lottery ticket and I'm going to win.' Time heals all wounds, and it seems one year is enough for people to get off the fence and make their move. The thinking is that it will be another 40 years before we have another storm like Katrina -- that's the timetable we're working with."
Pappalardo says there has been a lot of activity since Katrina, and that factor, plus a desire to help clients they've been working with since the company opened in 1978, is the reason the firm reopened so quickly in the flood-ravaged Lakeview neighborhood where it has always operated.
While there was some speculation, particularly by out-of-town investors, immediately following Katrina, Pappalardo says the level of activity didn't match the amount of local concern over it. However, he does predict another flurry of activity when the Road Home monies are put into action, though it won't be the windfall that many local residents expect.
"There's a tremendous amount of misconception of what this money will mean to the typical homeowner," Pappalardo says. "It's not a blank check; the government is not going to hand out $150,000 to everyone. I think it'll certainly help people, and people need that money. But it's going to come with a lot of strings attached and lots of stipulations on how that money can be used. So to say it's going to be an overnight success and that suddenly you'll see a pick-up truck in every driveway with hammers swinging away, that's a stretch."
Realtor Tommy Lewis with Talbot Realty Group shares Pappalardo's cautious optimism regarding the Road Home financial assistance, predicting its effect will be a "boom in construction in New Orleans for at least the next five years." But, if the projected $4.2 billion in aid is not properly distributed and later put to good use, Lewis warns, the result "potentially could be disastrous."
However, Lewis describes the restoration of the city's housing stock as "a long, drawn-out process that's going to test everyone's patience, and that's on top of all the frustrations we're already feeling."
One especially strong segment of local real estate, he says, is the condominium market. Local industry figures for years have predicted an increased demand for "vertical living" -- primarily, condos in high-rise buildings and warehouses that have transformed the Central Business District and Warehouse District over the past few years.
A primary factor causing this trend has been the metro area's lack of available land mass; surrounded by water, the city can't grow in concentric circles like the sprawling metro areas of Houston and Atlanta. After Katrina's flood, local residents' desire to live high off the ground -- one high-profile example is the planned Crescent City Towers on Howard Avenue -- compounds the push upward. "These types of projects are going to stay hot for a while," Lewis says.
"The condo market has really taken off," agrees Jerome Winder, a realtor with Coldwell Banker TEC.
Having worked primarily in Gentilly and eastern New Orleans during his 23 years in the real estate business, Winder says the market in those two areas is "very good." Both neighborhoods have undergone an increase in residential sales in recent months, he says, particularly Gentilly, where "investors are coming in, buying these homes and putting things back together."
Despite the recent surge in transactions and investments, Winder cautions that many obstacles remain, mainly issues related to homeowners' insurance. Illustrating this by the fact that his own policy premiums have jumped from $2,100 annually to over $4,000 a year, difficulties in obtaining affordable insurance will restrict the local market's renewal.
"Some people are going to have to buy a lot cheaper of a home than they wanted to, just so they can afford the monthly note, which is going to be higher because of the increased insurance premiums," Winder says.
However, Winder feels optimistic about the market's future. "It's going to get better," he says. "The Road Home is going to drop rental prices, spur renovation. Sales are brisk right now, and they'll probably pick up more. It's just not as easy now."