Big Easy's Housing in Eye of Beholder
Investors Snagging Flood-Damaged Bargains While Longtime Residents Vacate
By Peter Whoriskey
Washington Post Staff Writer
Tuesday, April 4, 2006; A03
NEW ORLEANS -- The windows were broken and the floodwaters had left marks like bathtub rings on the house's once-elegant facade. Inside, the walls had been partially stripped of plasterboard, and the scent of mold hung in the air. For blocks in any direction, the usual depressing signs of post-flood abandonment marked the neighborhood: moldy furniture at the curb, lawns turned an unnatural gray.

It turned out to be just the home Nathan Junius wanted.
"It's a darn nice house," said Junius, 27, a civil engineer who recently purchased the property for $245,000, or less than half its value before Hurricane Katrina, and intends to move in next month. "It's not crazy -- it's an opportunity."

The future of New Orleans's flood-ravaged neighborhoods may depend upon buyers such as Junius. With many residents unwilling or unable to rebuild, scores of neighborhoods will need bargain seekers to invest and renovate.

About half of the houses in New Orleans are still empty, waiting to be rebuilt or torn down. And though there are far more sellers than buyers here these days, the fact that there are people willing to purchase and occupy a house in the vast abandoned swaths of this city comes as a welcome sign among those who worry that some areas might never come back.

"To the extent that the market process is working -- it has life -- that's always a good sign," said James A. Richardson, a professor of economics at Louisiana State University who recently completed a report on the economics of the recovery. "Catastrophes do two things: They create incredible human misery, and they create opportunity. And that's what you want to happen, because that helps erase the misery."

On some blocks, "For Sale" and "For Sale by Owner" signs dot front yards. Other homeowners post signs announcing their intention to return, such as "We're Coming Home to Lakeview." More ominously, seven months after the catastrophe, most houses offer no clues at all to the owners' plans for the vacant properties.

Still, for those with faith in the city's future and a willingness to live in largely abandoned, low-lying neighborhoods, the areas are not without appeal. They are bargains.

In the Lakeview neighborhood, adjacent to the 17th Street Canal, where the flood walls collapsed, home prices are a third or half of their pre-Katrina value. Many of the Lakeview houses had water as high as 10 feet inside.

After the purchase price of $245,000 and $75,000 in flood repairs, Junius said, he probably will profit if home values ever approach their pre-Katrina prices, which he expects they will -- eventually.

"I got the best I could for the money," Junius said, while joking about the strangeness of living in an abandoned neighborhood. "If they tear a few more houses down around me, it will be like living in the country."

As one of the most affluent of the heavily flooded neighborhoods -- at least before the hurricane -- Lakeview may have the best chance of bouncing back.

Already it is attracting "move-up" buyers -- those who say they either could not afford the neighborhood before or could not have afforded as large a property, real estate agents said.

What's driving down prices, however, aside from the flood damage, is that so many people who once lived in the flooded neighborhoods no longer want to live there, the agents said.

Scores of houses are for sale. Some sellers have had their jobs transferred to other cities. Several said they do not want to raise their children in a neighborhood that for now -- and at least for the near future -- is largely abandoned. It's too gloomy and moldy. And some people, many of them retired, say they do not have the time and energy to devote to restoring a home while living in temporary quarters.

"I'm just too old," said Barbara Gowland, 68, a retired executive assistant. She and her husband hope to sell their Lakeview house for $150,000.

With $153,000 of flood insurance money, they bought a house in Kenner, a New Orleans suburb.
"We didn't want to take another year out of our lives to rebuild," she said. "It was sad. My husband was born and raised in Lakeview, and it took some coaxing. But we had to go."

Lisa and Jim Musso, the parents of one young girl, are ready to go, too.
Their first Lakeview house was flooded after Tropical Storm Isidore in 2002, so they tore it down and, using 50 truckloads of river sand, elevated their property and two years ago built a better home. That one flooded with six feet of water inside during Katrina.

"We almost decided to build a third home on the same property," said Jim Musso, a financial adviser. "But we decided it was time to leave."

They are asking $389,000 for their house, which, they said, would have fetched more than $700,000 before Katrina. They, too, had flood insurance and already have found a new home in Kenner.

Uncertainty over the levee reconstruction and over the new building guidelines has slowed the recovery and depressed prices further, many residents said.

The future strength of the new levees was cast in doubt once again last month by the announcement that, because of rising levee-reconstruction prices, not every portion of the metropolis may get levees strong enough to meet the standards of the federal flood insurance program.

Moreover, the federal maps that will define how high new or substantially new buildings must be elevated have not yet been issued. That leaves rebuilders to puzzle out for themselves just how high to raise their homes.

"They're slowly killing New Orleans with the delays," said Al Petrie, a Lakeview resident who assembled an investment group that has already purchased 15 properties in the neighborhood with the intention of rebuilding. "People just can't keep waiting."

Still, he indicated he is bullish on the area's real estate prospects, and he believes that by buying and restoring homes in his neighborhood, he can encourage investment there.

"We think we will be the first neighborhood to really come back," he said. "Unfortunately, there are people wondering if this will take two years -- or 10 years. I want people to know this is going to happen. It's a little bit of psychology as well as economics."

Like others in Lakeview who are tearing down flooded houses and building new ones, Petrie said the new building elevations -- as prescribed in the updated federal flood maps -- should ensure their safety. Some people are planning to elevate their houses an extra nine or 10 feet by building the living area over high-ceilinged garages.

Houses like Junius's new purchase do not have to be raised and are still eligible for flood insurance because they suffered damage less than half the house's value. So though his house may not stand as high above ground as the planned construction, he is protected against floods, he notes, at least financially.

"I got insurance, you know?" he said. "That's what insurance is for. If a huge storm comes then we'll have problems, but that's just the price you pay for living down here."

© 2006 The Washington Post Company