Hurricane Katrina Impact Mixed for Economy and Hou
Washington, DC, September 14, 2005--The direct housing needs for evacuees of Hurricane Katrina and lower interest rates that will soften its economic hit mean there will be long-term consequences for housing as well as the overall economy, according to the National Association of Realtors.
David Lereah, NAR’s chief economist, said shortages of building materials, made worse by the need to rebuild in areas hit by Katrina, will increase construction costs. “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,” Lereah said. “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.”
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.
