Washington, DC — The direct housing needs for evacuees of Hurricane Katrina, and lower interest rates that will soften the storm's economic hit, mean there will be long-term consequences for housing as well as for the overall economy, analysts said last month.
According to David Lereah, chief economist for the National Association of Realtors, shortages of building materials - made worse by the need to rebuild in areas hit by Katrina - will increase home construction costs, and ultimately prices.
"As displaced residents try to get back on their feet in new locations, home sales have spiked - along with rental demand - in regions surrounding the disaster zone," Lereah said. He noted, however, that mortgage interest rates will rise more slowly as a result of post-storm economic conditions, to accommodate the losses of homes, jobs and businesses.
"The lower level of borrowing costs will provide additional lift to home sales in other regions," the economist observed, adding that demand will continue to outstrip supply in most areas, "which will keep pressure on home prices."
It is estimated that 80% of the homes in New Orleans will have to be rebuilt. Along with homes that will have to be replaced along the Mississippi and Alabama coastline, a minimum of 200,000 homes have been lost, according to government estimates.
The storm's impact will cause the economy to grow more slowly than in earlier projections, but the economy will get a lift once rebuilding gets underway, Lereah said.
Impact of Hurricanes Hurts Stocks Again
Stocks associated with the kitchen and bath industry plummeted once again in September, as the beleaguered Gulf Coast states - along with Wall Street itself - attempted to recover from the impact of Hurricanes Katrina and Rita.
The index of 52 key stocks of building products manufacturers, distributors, retailers, home builders and e-commerce enterprises - as tracked in KBDN's exclusive monthly Stock Index - declined 60.15 points, or 2.39%, to close the trading period from Sept. 2 through Oct. 5 at 2455.13. In similar fashion, the Dow Jones Industrial Average plunged 130.04 points, or 1.78%, ending the month-long trading period at 10317.36, while the Nasdaq Composite Index dropped 38.05 points, or 1.78%, to close at 2103.02 (see Market Diary, below).
Declining stocks outpaced advancing issues 40-10, with only five of the stocks reaching a new 52-week high and an equal number declining to a new annual low.
Top gainers for the period included Knape & Vogt Mfg. and Electrolux AB.
Editor's Note: Several of the companies listed in KBDN's monthly Stock Index are parent companies of - or have key financial ties to - building and remodeling industry product suppliers. Included are the following: Armstrong World Industries (Triangle Pacific, Bruce Hardwood, Hartco Flooring); Black & Decker (Price Pfister, Kwikset, DeWalt); DR Horton (Schuler Homes); Electrolux AB (Frigidaire Co.); Fortune Brands (Moen, MasterBrand Cabinets - Aristokraft, Decorá, Diamond, Kemper, Omega Cabinetry and Schrock); Griffon Corp. (CLOPAY); Illinois Tool (Wilsonart International, Florida Tile); IAC/InterActiveCorp (ServiceMagic, Inc.); International Paper (Nevamar); Knape & Vogt (Feeny Mfg.); Masco Corp. (Merillat Industries, KraftMaid, Delta Faucet, Peerless Faucets, Aqua Glass/Huppe, Melard Mfg., Zenith Products and Baldwin Hardware); Maytag Co. (Jenn-Air and Magic Chef); Mohawk Industries (Dal-Tile); Newell Rubbermaid (Amerock); OfficeMax (formerly Boise Cascade); Pentair (Porter-Cable); Technical Olympic USA (Engle Holdings Corp. and other home-building companies.); Tomkins (LASCO Bathware and Pegler Ltd.); U.S. Industries (Jacuzzi Brands, Inc.); Weyco Group (Willamette Industries); and Whirlpool Corp. (KitchenAid and Roper).