Economic data that was gathered before Hurricane Katrina struck is trickling out but are the numbers relevant anymore? Homebuyers and investors are wondering, is it still a good time to buy a home?

For example, Katrina was a huge hit to the U.S. gross domestic product. Over 400,000 jobs were lost in the Gulf region, so that changes the unemployment claims picture considerably. As thousands of evacuees are relocated all over the country, it's not clear how their new statistical areas will report unemployment and housing.

Consumer spending reports for August didn't come out in time to include data immediately following the hurricane. While auto sales dropped due to the end of special pricing incentives, consumers spent more on electronics, personal care and sporting goods.

A better indicator than outdated numbers might be attitudes. A CNN-Gallup poll conducted recently found that four out of five adults believe that Hurricane Katrina and its aftermath will hurt their finances this year. This may cause a pullback in consumer spending.

But not in homes. Total housing, commercial and public property losses by Katrina are in the range of $100 billion, suggests the National Association of Realtors (NAR). Over 200,000 homes were lost along the coast, and nearly 80 percent of the homes in New Orleans will have to be rebuilt. Not only would rebuilding take years, it will create competition for the supplies of lumber, concrete, and other housing materials among builders nationwide, slowing housing starts from coast to coast. That will slow the amount of new housing available and pressure prices.

The impact of Katrina is already being seen in areas around the Gulf where evacuees are starting to settle. "The Katrina effect" as economists call it, is that housing demand for older homes will rise due to two factors -- increased construction costs for new homes and increased rental demand.

NAR economist Lawrence Yun suggests that both new and older homes will continue to rise in costs.

"New home prices will be immediately impacted because of increased construction costs," explains Yun, "and that will filter down to existing home prices as well." That's because as new house prices rise, more homebuyers will consider existing homes, increasing the demand (and prices) for them."

Michael Carliner, economist with the National Association of Home Builders, reports that increased housing demand is already evident in Baton Rouge and Houston, which had large inventories of vacant rental housing before Katrina hit. Much of that has now been snapped up, he says. In some areas of Baton Rouge, property values have been bid up over 30 percent in the last two weeks.

Meanwhile, jobs are expected to remain flat for some time as employers react cautiously to news reports.

With Katrina's interruption of productivity and loss of jobs, economists are predicting an economic slowdown, causing mortgage interest rates to drop. This could refuel a nation-wide housing demand.

However, expect to pay a lot more if you are buying new construction. Construction materials account for about one-third the cost of a new home. If raw materials increase by five to 10 percent, that impacts the cost of the home by as much as two to three percent.

According to David Lereah, NAR’s chief economist, housing inventory is already tight across the nation. He predicts that existing-home sales will nearly three and a half percent to over seven million this year, while new-home sales will rise nearly seven percent to nearly 1.3 million. He also predicts that mortgage rates will not rise as quickly as they were forecast to, and will end the year under six percent for a fixed rate mortgage.

Published: September 16, 2005

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.