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Extra
Katrina creates overnight boomtowns
Real estate agents scramble to house displaced families and businesses. Smaller Louisiana cities now have the tightest markets in the country.
By Melinda Fulmer
Hurricane Katrinas destruction of Louisianas largest city is boosting the fortunes of those that surround it, creating boomtowns almost overnight.
Flooded with 225,000 hurricane evacuees, Baton Rouge, located 75 miles northwest of New Orleans, has almost doubled its population.
The influx has sparked shortages of housing and commercial space and strained the citys infrastructure, including schools and roads. Homes in Baton Rouge that once lingered on the market are now being snapped up at previously unheard-of prices.
"I heard of one $90,000 house being bid up to $180,000," said commercial insurance broker Griffin Sole, who looked in the area for housing before moving on to Alexandria, a few hours west.
Some agents have a mandate from their corporate clients to buy up housing in Baton Rouge sight unseen, said David McKey of Coldwell Banker Phelps & McKey in Baton Rouge.
| Single-family home prices pre-Katrina | | Metropolitan area | 2002 | 2003 | 2004 | Q2 2005* | | Baton Rouge, LA | $116.9 | $121.2 | $127.7 | $135.4 | | Gulfport-Biloxi, MS | 100.2 | 107.6 | 113.9 | 124.0 | | Houston-Baytown-Sugar Land, TX | 132.8 | 136.4 | 136.0 | 142.5 | | Jackson, MS | N/A | 110.7 | 118.1 | 131.7 | | Mobile, AL | 104.8 | 109.1 | 115.2 | 129.1 | | Montgomery, AL | 113.6 | 115.7 | 116.6 | 133.3 | | New Orleans-Metairie-Kenner, LA | 123.5 | 130.8 | 137.4 | 152.6 | | Shreveport-Bossier City, LA | 90.3 | 100.7 | 110.6 | 125.1 |
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Source: National Association of Realtors *Preliminary figures in thousands of dollars, through second quarter 2005
For the complete list of 265 metro areas, click here.
Government agencies, such as the Federal Emergency Management Agency, have reportedly snapped up much of the new construction coming on the market, including the 343-unit high-rise condo development, Southgate Towers, being completed on the edge of the Louisiana State University campus.
About 75% of the available housing stock is probably spoken for, agents estimate, but they say they cant know for sure.
"They cant update the MLS (listings) fast enough," McKey said.
Agents say some New Orleans Realtors have even set up shop in Baton Rouge and are cold-calling homeowners to try to persuade them to put their house on the market now that this area -- which eked out just a 3.5% average price increase in the past year, one of the smallest in the nation -- is now in high demand.
A ripple effect throughout Louisiana
Warehouse and office space in the city of 225,000 is now gone, said Stephen Moret, chief executive of the Baton Rouge Chamber of Commerce.
"The most unfortunate thing is we do not have enough space to accommodate the companies that have been displaced," Moret said.
That has sent a second wave of migration to the smaller cities of Lafayette, west of New Orleans, and Alexandria, several hours northwest.
In Lafayette, the citys average available housing stock of 150 homes has declined by a third in the span of a week, said Bill Bacque, chief executive of the city's largest brokerage, Van Eaton & Romero. Larger companies have moved on, he said, to cities like Dallas and Houston where housing and commercial space are more plentiful.
With its 11 Louisiana apartment properties filled up in a matter of days after Katrina hit, Denver-based Apartment Investment and Management Co. has been routing hundreds of people to its apartments in Houston, Dallas, Austin, Memphis and Little Rock.
"Our phones have been ringing off the hook," said Patti Shwayder, senior vice president of AIMCO.
Employers enter the game
Some companies are taking the plunge and helping their employees to find houses to buy.
Agents say New Orleans-based utility company Entergy has made calls looking for 400 houses for its employees in Houston. Entergy officials said that while they are relocating employees to several states, including Texas, they could not confirm this information.
Its too soon to tell how many houses in Houston and other cities have gotten offers, said executives with the Houston Association of Realtors. However, in the first week of September, apartment rentals in Houston were up 30% from the year before, according to the group's database.
Temporary office and warehouse space is getting snapped up across the city, said Fred Baca, president of commercial brokerage firm Colliers International in Houston.
Baca thinks Houston could eventually keep some of these displaced companies, just as many companies kept operations in New Jersey or Connecticut after the Sept. 11, 2001, terrorist attacks in New York.
"If enough time goes by and youve resettled as a business in another community, it becomes a second relocation to go back home," Baca said. "Some of these people will make it a permanent move."
An opportunity upstate
A large percentage of the 561,000 housing units in New Orleans are likely destroyed, according to the National Association. of Realtors. While many of them will probably be rebuilt, some of the construction will also shift to Baton Rouge and other Louisiana cities, creating more construction, architecture and engineering jobs in these areas.
Still, the economic outlook in the region is far from rosy. Even with support from the government and other cities, Katrina could reduce employment by 400,000 people in coming months and trim economic growth by as much as a full percentage point in the second half of this year, according to a Congressional Budget Office assessment.
Some companies say they wont be headed back to New Orleans after the rebuilding effort gets underway in coming months. Many law and accounting firms and energy companies from New Orleans and the coastal cities of Mississippi have already made decisions to move operations permanently to cities such as Baton Rouge and Lafayette and have signed long-term leases there, brokers say.
And more are being courted by smaller cities looking to boost their local economy.
The city of Shreveport, near the Texas border, has taken out ads in the Baton Rouge Advocate touting its large supply of commercial space and ample housing stock.
"Baton Rouge has doubled its population in a week and there is not enough housing there for business resumption," said Shreveport mayor Keith Hightower. "We have housing, we have office space and we have businesses that want to adopt those that want to relocate."
In some cases, real estate companies are even trying to bring business into their hometown. Rod Noles, owner of Noles-Frye Realty in Alexandria, is trying to attract key companies to the city by promising to buy back the houses of employees who stay in the area more than a year at 85% of the purchase price if they eventually decide to leave.
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Insurance broker Griffin Sole was lured to the area after a conversation with Noles in an Alexandria restaurant. After several days on the road with his pregnant wife, Elisa, trying to find suitable housing in Baton Rouge or Lafayette, Sole finally decided to put an offer on a house in Alexandria.
Located halfway between Dallas, where Griffins insurance company, Chicago-based Hub International, will likely set up shop temporarily and their old home in New Orleans, it seemed "pleasant" and less "desperate" than Baton Rouge and Lafayette, Sole said.
"We figure the worst-case scenario is well have an investment property here in Alexandria."
The couple, who also operate a Quiznos sandwich shop in downtown New Orleans, may also contemplate opening a new restaurant in this adopted home. "Its a nice city."
It all hinges on New Orleans
Baton Rouge officials believe their city will continue to grow as well, as some displaced businesses take a liking to the city and as its infrastructure and amenities grow in the wake of Katrina.
"I really think five years from now people will be talking about Baton Rouge the way they talked about Austin (Texas) five years ago," Moret said.
But, he adds, much of this growth will depend on New Orleans making a sound recovery. And thats no sure bet, analysts and economists say.
"No one knows how long it will be before New Orleans gets back on its feet and how much it will get back up on its feet," said Walter Moloney, spokesman for the National Association of Realtors.
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