Hurricane Katrina, which battered the U.S. Gulf Coast two weeks ago, will have long-term consequences for the housing market and economy, boosting both home prices and construction costs as rebuilding gets underway, a trade group said Tuesday.
Total housing, commercial and public property losses by Katrina total about $100 billion, the National Association of Realtors said in its monthly economic forecast.
Rebuilding will put pressure on the already short-supply of building materials, sending construction costs higher.
As building activity is focused on the hurricane affected areas, housing inventory will remain tight nationwide, meaning demand will continue to outstrip supply in most areas, the group’s chief economist, David Lereah, said.
Stubbornly low long-term mortgage rates will inch up even more slowly than previously predicted, Lereah noted, due to ”post-storm economic conditions to accommodate the losses of homes jobs and businesses.”
He pegged the average 30-year fixed-rate mortgage at 5.9 percent for the fourth quarter, lower than his previous target of 6.2 percent.
Lereah boosted his estimates of new and existing home sales for the year, seeing records for both. He said resales of previously owned homes should climb 3.4 percent to 7.02 million units in 2005, up from last month’s estimate of 6.98 million for the year. New home sales should increase 6.7 percent to 1.28 million, up from his prior forecast of 1.26 million.
Total housing starts should hit 2.04 million units this year, the highest since 1973 as single-family starts grow to a record 1.69 million, the group estimated.