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No homes for New Orleans?

From modest manufactured homes to waterfront estates, no structure that sat in Hurricane Katrina's Gulf Coast path was wholly spared. In places, entire swaths of housing have been blasted from the earth. And in coming months, a massive rebuilding effort will have to take place.
/ Source: Forbes

The graceful seaside town of Pass Christian, Miss., has been wiped out. Jefferson Davis's house, which has stood in Biloxi for more than 150 years, is badly battered. The Gulf Coast is a hellish nightmare. Countless New Orleans homes are drowning in dirty water.

From modest manufactured homes to waterfront estates, no structure that sat in Hurricane Katrina's Gulf Coast path was wholly spared. In places, entire swaths of housing have been blasted from the earth. And in coming months, a massive rebuilding effort will have to take place.

The enormous task of clearing debris from New Orleans, organizing homeowners' and flood relief insurance payouts, manufacturing and obtaining sufficient construction material and equipment, building or rebuilding thousands of homes, and feeding and housing the workers who will build them now lies ahead. And that's not even taking into consideration replacing commercial properties, like gas stations, supermarkets and shopping malls.

If past experience is an indicator, the process will start slowly and continue for months. It will likely create shortages in building materials, which will cause price increases and urge the prices of new homes upward nationally.

"Although there's no official assessment yet, I think the number of housing units destroyed is going to dwarf any previous disaster," says Michael Carliner, economist for the National Association of Home Builders. "Hurricane Andrew was estimated at 28,000 homes destroyed. The number of homes that are flooded now, that are probably beyond repair, is probably much larger. There are 200,000 homes in New Orleans alone."

Though nobody yet knows the full extent of the damage, 80 percent of New Orleans has been flooded since early this week. Even under slightly better circumstances, Carliner says, the majority of homes, including many historic ones, could not be salvaged.

"With clean water, if you submerge a house for a week, it's not going to be livable anymore," Carliner says. The water that has inundated New Orleans since levees against Lake Pontchartrain failed is polluted with chemicals and sewage. "It would be very difficult to get those contaminants out of the houses."

A lot of planned construction in the region will now not take place, for obvious reasons, says Eric Belsky, executive director of Harvard University's Joint Center for Housing Studies. But soon a significant repair effort will begin, and accelerate as insurance claims are sorted out and disaster relief money is distributed.

"In the short run, you're going to start seeing a growing demand for building material products, which are already under significant demand with the home building industry humming along so much," Belsky says. "It means that there will be even more pressure on prices in that area."

Machinery and labor will be needed for removing debris, Carliner says. Among the products that will become scarce are roofing, plywood and so-called OSB panels, which are also wood-based.

"It's going to divert some key materials. It's going to have an effect on building elsewhere," Carliner says, pointing out that there are other supply pressures. "A lot of the areas that were hit are areas that produce wood products."

On Monday, recognizing a potential problem, Atlanta-based Georgia-Pacific announced that it planned to keep prices of wood panels at pre-storm levels in declared disaster areas, until the supply of materials is adequate.

"It will also mean a significant increase in demand for manufactured houses," Belsky says. "Because it's a more accepted form and common form of housing [in the region], and it can be supplied relatively quickly."

Stocks of manufactured housing companies, including Champion Enterprises and Cavalier Homes, jumped this week because of the potential increases in business.

Stan Smith, director of the Bureau of Economic and Business Research at the University of Florida in Gainesville, has studied the impacts of hurricanes on Florida's population. In 1992, he says, an estimated 350,000 people were forced out of their homes by Hurricane Andrew. Some were gone very temporarily.

"Some people never came back," he says. The storm probably reduced Dade County's population by about 40,000 people, he says, with about 15,000 leaving the state and about 25,000 moving to different counties.

Within two years, the county had regained that population, and the disaster seemed to have no effect on population growth after that. The same holds true — on a statewide basis, at least--for the four hurricanes that hit Florida last year, which damaged about 2.5 million homes, he estimates.

"It boils down to the fact that hurricanes are not the only thing people look at when they're deciding where to live," Smith says. "There's the job situation, climate, cultural activities, family and friends...I think memories are short. As time goes by, you tend to think, well, it won't happen again."

Still, he adds that several places that were hit directly in 2003 saw population declines. Punta Gorda, on Florida's southwest coast, is one example. And, as several experts have pointed out, it's difficult to predict what will happen after this storm, as devastating as it has been.

"Katrina could be very different," Smith says. ''I could see the population impact being considerably greater."

And even for people who decide to stay, home will never be the same again.

"The loss of homes for many — even if they were to build a new one, it doesn't really replace the old home in terms of memories, emotional attachment," says Laurence Yun, senior economist for the National Association of Realtors. "That's a permanent loss."