Katrina Expected to Feed Boom

I was wondering when someone would write this story, and now Reuters reporter Lynn Adler has beat everyone else to the punch. What will Hurricane Katrina's impact be on the housing market:

NEW YORK, Sept 2 (Reuters) - Swathes of U.S. Gulf Coast homes destroyed by Hurricane Katrina scar the region's landscape, but eventual rebuilding will stoke an already torrid national housing market, economists say.

The disruption in the region's energy supply, sparking record oil prices and crimping consumer spending, are seen thwarting aggressive interest rate hikes by the Federal Reserve. Mortgage rates are sliding as a result, keeping U.S. home sales near record levels.

"Down the line, and we usually find this after natural disasters -- and this disaster sticks out as being the worst -- the normal process is immediate destruction of wealth and then stimulus to economic activity as you go forward" rebuilding and remodeling, says David Seiders, chief economist at National Association of Home Builders.

"It will help support GDP numbers as we get into 2006," he predicts.

New Orleans and other Gulf Coast areas are now in disaster recovery mode with floods, fires and evacuations the focus. Homeowners cannot return to assess what is left of their real estate, or their jobs.

The one-two punch of job loss and energy price spikes will at least temporarily slow the U.S. economy, analysts say.

Find the rest of the story at this link.

— The Boy in the Big Housing Bubble