(MONEY Magazine) - Last summer, the raging winds and water of Hurricane Katrina seemed to topple Biloxi's housing market along with tens of thousands of homes in the area. Yet just six months later, prices have rebounded -- and more.

"Buyers were looking for anything we had standing," says Joe McVey, an agent with Keller Williams Realty in Biloxi. Consequently, sale prices in Biloxi have risen about 25% since Katrina, for both newly constructed homes and the few older ones that emerged relatively unscathed from the storm.

Biloxi's rebound is a testament to the enduring appeal of coastal real estate, where waterfront home prices have almost always proved far more resilient than many of the homes themselves.

A year after Hurricane Charley hit the Fort Myers, Fla. area in 2005, for example, prices were up more than 33%.

"What we have found is that as long as disasters occur infrequently, people aren't really scared off," says Grant Thrall, a University of Florida professor who has studied the impact of natural disasters on home values. In Biloxi, inflated building materials prices as well as a lack of construction workers following Katrina have intensified the housing shortage.

Besides the post-hurricane effect, several factors point to a continued upswing for Biloxi.

For one, prices are still reasonable relative to those in other coastal communities. Realtors say that baby boomers priced out of California and Florida have increasingly been looking for vacation and retirement properties in Biloxi. New three-bedroom homes near the water cost about $400,000, half of what you'd pay in a popular Gulf Coast city like Tampa.

Huge investment from the casino industry should also help revive the city's economy. Katrina wiped away the strip of waterfront casinos and hotels that had been Biloxi's economic lifeblood for the past 13 years. But nearly all of the casinos that were damaged or destroyed are scheduled to reopen in the next year, even larger and grander than they were before the storm.

"Biloxi could become the next Reno or Monte Carlo," says a wildly optimistic McVey.