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.