Investors search for Bargains In New Orleans.

As thousands of people left New Orleans in the face of Hurricane Katrina and vowed never to return, Ryan Dougherty started looking for a home there.
The 32-year-old Charleston, S.C., entrepreneur, who has been investing in homes since he was 18, specializes in buying bargain-price historic homes in need of repair in places hard-hit by disaster. He doesn't sell them, but renovates and holds them for the long term for their equity value as the cities recover. "It may take years, but they always bounce back," he says.
For instance, his first purchase, for about $650,000, was a classic shotgun-style home in a Charleston neighborhood ravaged by hurricane Hugo in 1989; as the city cleaned up, it almost doubled in value. The pre-War New York condominium he bought for $240,000 in 2001, shortly after 9/11 caused a temporary dip in home prices, has tripled in value. Now he's advertising on the Internet for another home in New Orleans that he can fix up and add to his portfolio. He hopes to find a place that's selling for at least 30% off of its pre-Katrina value. "In chaos, there is opportunity," he says.
For the battered residents along the Gulf Coast, the chaos caused by flooding, looting and desperate bids for rescue is subsiding -- but now a different form of confusion is taking its place: a frenzy of real-estate deals.
Premium Prices
In places slammed directly by the storm, such as New Orleans and coastal Mississippi and Alabama, speculators are trying to grab damaged homes at discounts while owners of intact homes are listing their properties at premium prices; in Baton Rouge, La., crowded with evacuees, nearly any house that comes on the market disappears instantly in a bidding war.
Some real estate in the hardest-hit areas affected by Hurricane Katrina is attracting money from speculators who think prices for quality properties will rise. Among the hurricane-damaged properties was Charnley House of Ocean Springs, Miss.

At the storm's center, where condos were crushed, houses were flooded, and homes everywhere badly damaged or destroyed, rebuilding is the top priority. According to the National Association of Realtors, about 80% of the homes in the flooded city of New Orleans will have to be rebuilt. On the Mississippi coast, at least 1,187 homes have been destroyed and 7,286 severely damaged, according to the Mississippi Emergency Management Agency. Many more in New Orleans may be torn down or require rebuilding.
The Intact Homes
What the cameras didn't capture, however, are the homes that survived the storm almost completely unscathed, like Adam Rothlein's three-bedroom Victorian home in New Orleans' Garden District.
Mr. Rothlein, who owns a music-video production company, escaped to Colorado before the storm hit. Friends confirmed that his house escaped damage, but after seeing television reports of the storm's devastation of the rest of the city, he has no desire to return. So he put his house up for sale on the Internet for $695,000. Mr. Rothlein says he's had lots of inquiries, even though no one will be allowed back into the city to tour the home until next week.
Mr. Rothlein's house might not appeal to bargain-hunting speculators looking for a fix-up deal because he's already fixed it up. He bought the home for $345,000 only a year ago, and put in about $100,000 in renovations, including new kitchen appliances, bathroom fixtures, and floors. Before Katrina hit, he would have put the house on the market in the mid-$500,000s, but now, given the shortage of undamaged homes, he figures it will be worth much more to a local family who doesn't want to scramble to find home-improvement contractors in a recovering disaster zone. How much more, however, is only a guess. "Nobody really knows what prices here will be," he says.
Benefits of U.S. Funds
Meanwhile, out-of-town speculators are mobbing New Orleans real-estate broker Todd La Valla, ready to do deals as soon as flooded title companies are back in business. He expects annual home price appreciation, which averaged in the 6% to 8% range before the storm, to double over the next year. Scarce supply is only one reason, he says; another is that private investment and federal funds promised to the area will upgrade the current housing stock -- much of which had fallen into "genteel neglect," he says -- and spur massive amounts of new construction. "I think many areas of the city are going to come back stronger than they were before," he says.
Speculators are also swarming other areas hard-hit by the storm along the Mississippi coastline. Ray Gonzales, Jr., principal broker at Century 21 Williams & Associates in Gulfport, Miss., says that investors make up about 40% to 45% of his firm's buyers, about double the number before the storm, and prices already have jumped 10% -- much like they did following Hurricane Camille, which devastated the area in 1969. Since the storm, all of his firm's undamaged and salvageable inventory -- including whatever was left standing of the luxury high-rise buildings that were under construction along the beach -- went under contract, and some buyers are now going door-to-door trying to make deals. He predicts the median home price, which was $127,400 before the storm, is now more than $160,000 and will go up more in the next few months. Bridget Ferrucci, another Gulfport agent, says speculators are tying up the phone lines at her office, many saying "we'll buy anything, fix it up, and resell it."
Beyond the region hit hardest by the hurricane, real-estate prices also are booming. Swollen from evacuees from Katrina, with a population nearly triple the 350,000 residents who lived there pre-Katrina, Baton Rouge has become a boomtown almost overnight. The Greater Baton Rouge Association of Realtors says median prices, which were about $140,000 before the storm, have risen between 20% and 30% over the last week.
Tenant Evictions
Many are trying to cash in while demand is most desperate. Maria Yiannopoulos, who mans the local FEMA legal help line, says that in the last two days, 80 calls have come in from tenants that have been evicted on a few days notice, so landlords can sell their homes at inflated prices. Indeed, Ms. Yiannopoulos says her father in Baton Rouge has been besieged with offers to buy his modest home for as much as $500,000 -- "far more" than its pre-Katrina value. "Real estate is just being gobbled up here," she says.
Demand is so pressing, even people in the far outskirts of the city are feeling it. Before Katrina hit, Susan Durham had been trying to sell her four-bedroom stucco home in Prairieville, La., about 17 miles from downtown Baton Rouge, for $329,000. She took it off the market immediately after the storm when her daughter and some friends needed temporary shelter, but has now put it back on for $339,000. "The market here is crazy," says Mrs. Durham, an artist. "Everything is topsy-turvy."
Although they know they aren't going to get any bargains in a boomtown, speculators are still nosing around. Vinu Zacahriah, a New York computer consultant, flew to Baton Rouge last weekend. But he found the city so crowded with evacuees and other investors, he couldn't even get a hotel room, and had to stay in Yazoo City, Miss., a four-hour drive away. When he saw how few homes and condos were available for sale and how high prices had climbed, he switched gears and started searching for raw land. He found some for about $30,000 an acre, which he plans to buy, subdivide, and sell to builders whom he expects to soon flock to the area. "There will be demand for homes for years to come," he says.