Do Disaster-Impacted Homes Recover Value? © 2012 by Wayne D. Lewis, Sr.

 

 

For many along the Gulf Coast, hurricanes, tornadoes and floods are a way of life. For as far back as record history, the Gulf Coast has experienced any number of severe hurricanes, often bringing surges and torrential rains that either damage totally, or completely wipe out towns, and communities. But, for reasons that aren’t always clear, people return to those areas, the same way people return to areas affected by tornadoes in the Mid-west, or fires in California and surrounding states. People eventually rebuild.

But even as people rebuild, they eventually sell their homes. The question is, for how much are they able to sell their homes? Are they able to make over and above what they purchased it? Or, are homeowners forced to accept far less than they would have ordinarily received had their homes not been burned to the ground, washed off of its foundation, and flooded to the rafters or by any other means by which nature makes her tremendous impact on our various communities? The absolute answer would require a full scaled study. I don’t anticipate doing one here. But I will take a look at 3 communities around the New Orleans area. I will take three communities, for which I will only look at and compare their current values, their values just prior to Hurricane Katrina to see if these properties have recovered their pre-storm value.

The areas that I have selected are:

· Gentilly (area 76)

· Lakeview (area 69)

· Mid-City (area 68)

These areas all suffered flooding as a result of the aftermath of Katrina, in other words, the flood walls either gave way, or were breached, but I will not get into that discussion. We are discussing how these properties may have or may have not recovered since 2005. Here are the specifics that I will be looking at just to get a snapshot of how these properties have faired, looking at them in average sales:

# of properties; 3 bedrooms; 2 baths; sq ft of living area; $ per sq ft; Days on Market (DOM)

I am going to be looking at the 2^nd quarter of 2005 and comparing it to the same quarter of the year 2008 and our current year, 2012. While other factors may have affected the values from either a local or national perspective, those factors, for the purpose of this investigation will be taken off of the table. What we are looking for is the optimum dollar per square foot that a house is selling for now, in hopes that that home is now worth as much now, if not more than before Hurricane Katrina. Your results may vary. Here is what we learned (See Table below):

 

Years/ Areas of New Orleans	2nd Quarter of Respective Years
	Y2005			Y2008			Y2012
	Mid City (68)	Lakeview (69)	Gentilly (76)	Mid City	Lakeview	Gentilly	Mid City	Lakeview	Gentilly
Avg Sq Ft	1698	2326	1623	1763	2667	1395	1633	2125	1542
Bdrms 3>	3	3	3	3	3	3	3	3	3
Baths 2	2	2	2	2	2	2	2	2	2
DOM	50	55	42	166	149	88	73	25	94
$perSQFT	$     112.51	$      142.43	$      93.39	$ 186.21	$  109.09	$   87.35	$   96.76	$ 153.47	$   76.28
Total # of Prps	50	55	34	11	9	16	21	9	17

 
Sources: http://nom.mlxchange.com; http://www.gsrein.com 

Mid City

As we look at the above table, we can see that in the 2nd Quarter of 2005, prior to Hurricane Katrina, 50 single family homes sold in Mid City.  They were selling then at $112.51 per sq ft.  After Hurricane Katrina, in 2008, for the 2nd Quarter, the average $per Sq Ft. increased by 60% to $186.21.  By the 2^nd Quarter of this year, 2012, Mid City homes sales of 3 bedrooms 2 baths, accounted for decrease from the 2^nd Quarter of 2008 to $96.76, or a 52%  reduction.  Compared to 2005, before Hurricane Katrina, where homes were at $112.51 $ per sq ft, the 2012  amount is down by 14% from 2005 in Mid City (Area 68).

Lakeview

As we look at the table above, the area of Lakeview, in 2005, average sales for a 3 bedroom 2 bath single home was at $142.43 per sq ft. in its 2^nd Quarter. We had 55 singled-family homes that sold at this rate.  By 2008, the 2^nd Quarter, we had 9 properties that sold $109.09 per sq. ft.  This accounted for a 76% difference from the sales of 2005’s second quarter in $per sq. ft.  In 2012, we still had 9 single-family, 3 bedroom homes that sold in the 2^nd Quarter at $153.47 per sq. ft.  2012 represented more than a 70% increase in those quality of homes from 2008.  Additionally, we see that an 8% increase occurred in the Lakeview area (69) in from 2008 to 2012, which suggests that while the dollar per square foot dropped to $109.09 for the first 3 years, that Lakeview seems to have excelled since pre-Katrina.

 

Gentilly

The Gentilly area (76) of single-family homes 3 bedrooms 2 baths for 2012, 2^nd Quarter ended at $76.28 per square foot sold.  This represented a 33% decrease from the same quarter in 2005, pre-Katrina at $93.39 per square foot.  2008’s 2^nd Quarter  per dollar square foot at $87.35 comparatively speaking, was a 19% plus in their dollar per square foot compared to 2012’s 2nd Quarter decrease in the Gentilly area, that was at $76.28 per square foot.

Summary

This summary looked at the sale of homes in 3 selected areas of New Orleans proper that were reported to have flooded or were severely damaged from Hurricane Katrina or its aftermath.  What we see in the explanations above, including the table, is that there is a  possibility that the disaster of over 7 years ago, may have had an impact.  While there were and still are external factors that affect housing values in not only these areas, but the entire New Orleans area, the disaster did appear to have some type of affect in 2008, three years after the storm in all three areas, and not all bad.
What we want to notice about this non-scientific study is that there were some areas that were impacted by the summer disaster of 2005 that appeared to have suffered in dollar per square foot.  Whether it was directly related to Hurricane Katrina is not conclusive, but we want to see if those properties that were impacted similarly, have recovered their pre-Katrina value.

According to the table above, the Gentilly area continued to decrease in dollar per square foot dropping from $93.39 per sq ft in 2005’s  2^nd Quarter to $87.35 per square foot in 2008’s 2^nd Quarter, and hopefully, bottomed out in the 2^nd Quarter of 2012 at $76.28.  You may want to check with your Realtor to determine the most recent status of sales in your area. 

Although the Mid City area stepped up in the 2^nd Quarter of 2008 when it saw a 40% increase 3 years after the storm from  its pre-storm value of $112.51 per sq. ft. to $186 per sq. ft., it fell back to $96.76 per square ft., loosing $15.75 per square foot or 14% of it’s pre-storm value in 2012’s 2^nd quarter.  The only good news, as it relates to our study, is that the Lakeview area showed a total rebound from the 2^nd Quarter of 2005, pre-Katrina from $142.43 per sq ft. to $153.47 per sq. ft. an 8% improvement for the 2^nd Quarter of 2012.  This was able to be accomplished despite the fact that Lakeview suffered short term loss of value for the 2^nd Quarter for 2008 at $109.09.

 

Conclusively, the areas of Gentilly, Mid City and Lakeview had their struggles over the past 7 years since Hurricane Katrina.  While this study used Hurricane Katrina as a measuring stick in terms of time reference, and the fact that many of the properties in the affected areas were likely impacted by the storm, it should not be concluded that the storm actually damaged the properties included in this study.  But it is safe to say, that the homes that are used in this study were likely to have been impacted by virtue of flooding, wind damage, or any other hurricane related activity that was in proximity to these subject locations. 

 

This has been an opinion of factors related to Hurricane Katrina and sales in the New Orleans area. Your results may vary.  You are advised to consult with your Realtor or Appraiser for more up-to-date information.