New Rules of Real Estate 2007

How to play the real estate bounce-back

The housing market may be melting down, but Business 2.0 worked with Moody's Economy.com to identify 10 cities that have just about hit rock bottom - and offer opportunities for savvy investors to get in while the getting's good.

New Orleans
New Orleans
Projected median sales prices for single-family homes:

Q1 2008: $153,850
Q4 2009: $162,600
Growth rate: 5.7 percent

Two years after Hurricane Katrina, New Orleans is a special case. Half of the city's schools remain closed, and 60 percent of its hospitals are shut down. The storm displaced more than a third of the city's population and destroyed or damaged 200,000 units of housing. A rush to buy anything left standing created a short-lived housing bubble last year, but prices have fallen back to pre-Katrina levels. What remains is a shortage of workers - the unemployment rate has dropped from double digits to right around the national average - and a lack of affordable housing. That's put extreme pressure on the rental market, with rents jumping nearly 40 percent in 2006, according to the nonprofit Greater New Orleans Community Data Center.

Those topsy-turvy trends make New Orleans the most difficult market on our list to predict. It's actually split into two halves: intact homes vs. those damaged by the flood. The latter represent the bottom half of the housing market, yet that's where the upside lies during the next two years. Local speculators bought up thousands of homes that were selling in the $150,000 range before Katrina for as little as $70,000 immediately after the hurricane. They've been renovating them with bells and whistles like marble countertops and listing the properties for about $200,000, says Arthur Sterbcow, president of Latter & Blum, the largest real estate brokerage on the Gulf Coast.

The locals got in early, but there will be a second opportunity for others to buy distressed properties at a deep discount. Latter & Blum estimates that New Orleans will witness more than 20,000 foreclosures during the next 24 months.

Dallas-Fort Worth

Indianapolis

New Orleans

Atlanta

Montgomery

Memphis

Mobile

Austin

Houston

St. Louis
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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.