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KATRINA'S AFTERMATH

Speculators Rushing In as the Water Recedes

Would-be home buyers are betting New Orleans will be a boomtown. And many of the city's poorest residents could end up being forced out.

September 15, 2005|David Streitfeld | Times Staff Writer

BATON ROUGE, La. — Brandy Farris is house hunting in New Orleans.

The real estate agent has $10 million in the bank, wired by an investor who has instructed her to scoop up houses -- any houses. "Flooding no problem," Farris' newspaper ads advise.

Her backer is a Miami businessman who specializes in buying storm-ravaged property at a deep discount, something that has paid dividends in hurricane-prone Florida. But he may have a harder time finding bargains this time around.

In some ways, Hurricane Katrina seems to have taken a vibrant real estate market and made it hotter. Large sections of the city are underwater, but that's only increasing the demand for dry houses. And in flooded areas, speculators are trying to buy properties on the cheap, hoping that the redevelopment of New Orleans will start a boom.

This land rush has long-term implications in a city where many of the poorest residents were flooded out. It raises the question of what sort of housing -- if any -- will be available to those without a six-figure salary. If New Orleans ends up a high-priced enclave, without a mix of cultures, races and incomes, something vital may be lost.

"There's a public interest question here," said Ann Oliveri, a senior vice president with the Urban Land Institute, a Washington think tank. "You don't have to abdicate the city to whoever shows up."

For now, though, it's a seller's market, at least for habitable homes.

Two months ago, Steve Young bought a two-bedroom condo in New Orleans' Garden District as an investment for $145,000. Last month, he was transferred by Shell Oil to Houston. Last week, he put the condo on the market.

In a posting on Craigslist, an Internet classified advertising site, Young asked $220,000. He got a dozen serious expressions of interest -- enough so he's no longer actively pursuing a buyer.

"I'm pretty positive the market's going to move up from here," he said.

So, to their surprise, are many others.

"I thought this storm was the end of the city," said Arthur Sterbcow, president of New Orleans-based Latter & Blum, one of the biggest real estate brokerages on the Gulf Coast.

"If anyone had told me two weeks ago that I'd be getting the calls and e-mails I'm getting, I would have thought he was ready for the psychiatric ward."

Messages from those wanting to buy houses -- whether intact or flooded -- and commercial properties are outrunning those who want to sell by a factor of 20, said Sterbcow, who has set up temporary quarters in his firm's Baton Rouge office.

"We're pressing everyone into service just to answer the phones," he said.

These eager would-be buyers may be drawing their inspiration from Lower Manhattan, which proved a bonanza for those smart enough to buy condos there immediately after the Sept. 11 attack.

Of course, in southern Louisiana, everything is hypothetical for the moment. The storm destroyed many property records and displaced buyers, sellers, agents and title firms, so no deals are actually being done. Insurance companies haven't started to settle claims yet, much less determine how, or whether, they will insure New Orleans in the future. The city hasn't even been drained.

But people are thinking ahead, influenced by a single factor: the belief that hundreds of billions of dollars in government aid is going to create a boomtown. The people administering that aid will need somewhere to live, as will those doing the rebuilding. So will employees of companies lured back to the area, and the service people that attend to them.

All this will lead to what Sterbcow delicately calls a "reorientation" of the city.

"Everyone I talked to has said, 'Let's start with a clean sheet of paper, fix it and get it right,' " he said. "Some of the homes here were only held together by the termites."

What the owners of the city's estimated 150,000 flooded houses will get out of "reorientation" is unclear, especially if the houses were in bad shape and uninsured.

Some black New Orleans residents say dourly that they know what's coming. Melvin Gilbert, a maintenance crew chief in his 60s, stood outside an elegant hotel in the French Quarter this week and recalled how the neighborhood had been gentrified.

He remembered half a century ago when the French Quarter had a substantial number of black residents.

"Then the Caucasians started offering them $10,000 for their homes," he said. "Well, they only bought the places for $2,000, so they took it and ran."

The white residents restored the homes, which rose quickly in value. Gilbert said he expected the same dynamic when the floodwaters receded in the heavily black neighborhoods east of downtown.

The question of who should own New Orleans is already sparking tension. The first posting seeking New Orleans property "in any condition or location" was placed on Craigslist on Aug. 29, while the storm still raged. With small variation, it was repeated numerous times over the next week.

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