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.
