The impacts of Hurricane Katrina will reverberate across the U.S. housing market and economy, the National Association of Realtors stated in an announcement today.
“Given the general tight inventory of homes available for sale across the country, rebuilding in the region of the Gulf Coast will place additional pressure on overall home prices,” said David Lereah, chief economist for the association. “As displaced residents try to get back on their feet in new locations, home sales have spiked – along with rental demand – in regions surrounding the disaster zone.”
Lereah also said shortages of building materials, made worse by the need to rebuild in areas hit by Katrina, will increase construction costs.
Association president Al Mansell is meeting with Realtors and member associations in the Gulf Coast region this week to present relief checks and to assess long-term consequences of the disaster.
According to the trade group announcement, it is estimated that most of the flooded homes will have to be rebuilt, including about 80 percent of the homes in the city of New Orleans. Along with homes that will have to be replaced along the Mississippi and Alabama coastline, a minimum of 200,000 homes have been lost, the group reported, while the level of new housing construction will be only 130,000 higher than pre-Katrina projections.
“Housing construction will be insufficient to replace the number of homes destroyed or that will have to be demolished,” Mansell said in a statement. “Apartment vacancies are dwindling and mobile homes will help to address the jump in housing needs.”
The Louisiana Realtors Association has launched http://www.HurricaneHousing.net, a site that allows Realtor members and property owners to submit data on available shelter in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi and Texas. People displaced by the hurricane can search the database directly.
An estimated 28,000 Realtors have lost homes and businesses in the disaster, the association reported. Mansell said that a Realtors Relief Foundation is providing emergency relief for hurricane victims, and has already collected about $2.8 million for the relief effort.
The storm’s impact will cause the economy to grow more slowly than in earlier projections, but the economy will get a lift once rebuilding gets under way, according to a trade group forecast. The U.S. gross domestic product is forecast to grow at a pace of 2.3 percent in the third quarter and 2.7 percent in the fourth quarter, with GDP for all of 2006 pegged at 3.8 percent.
Nationally, existing-home sales are expected to increase 3.4 percent to 7.02 million this year, while new-home sales are forecast to rise 6.7 percent to 1.28 million for 2005 – both would be records. Last month, the totals were projected to be 6.98 million and 1.26 million respectively. Total housing starts – single-family and multifamily – should grow by 4.8 percent to 2.04 million units this year, the highest since 1973; single-family starts are expected at a record of 1.69 million.
“Mortgage interest rates will rise more slowly as a result of post-storm economic conditions to accommodate the losses of homes, jobs and businesses,” Lereah said. “The lower level of borrowing costs will provide additional lift to home sales in other regions. Demand will continue to outstrip supply in most areas, which will keep pressure on home prices.” Total housing, commercial and public property losses by Katrina are in the range of $100 billion.
The 30-year fixed-rate mortgage is forecast to rise more slowly, reaching 5.9 percent in the fourth quarter, and 6.7 percent by the end of 2006. The national median existing-home price for all housing types is projected to rise 10.8 percent in 2005 to $205,100. With a greater concentration of construction in lower-cost areas, the median new-home price should increase 3.8 percent to $229,300 this year before rising at a faster clip of 6.2 percent in 2006.
The unemployment rate is seen to peak at 5.3 percent during the first half of next year before declining in the second half. The Consumer Price Index is expected to increase 3.5 percent this year, while inflation-adjusted disposable personal income should grow by 1.4 percent. The consumer confidence index is likely to dip to 100 early next year, and then rise to 107 by the end of 2006.
***
Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.
