A funny thing happened on the way to recovery. The value of property along Mississippi’s Gulf Coast, some of it damaged and even wiped out by Hurricane Katrina, increased. According to the U.S. Office of Federal Housing Enterprise Oversight, property values along the Mississippi Gulf Coast skyrocketed in the four quarters beginning with the third quarter of 2005 and ending in the third quarter of 2006.
Although it seems an anomaly, especially with the devastation wrought by Katrina, it’s even more unusual when you consider the national average of property values in the same period appreciated by only 7.7% during that same period, down from the previous year’s 13.9% increase.
Besides the Gulfport-Biloxi region, hurricane-affected markets in Baton Rouge and Mobile also experienced appreciation rates “that remain at or near record-setting rates,” according to the report. The value increases are: Gulfport-Biloxi, 23.3%; Baton Rouge, 14.1%; and Mobile, 17.5%.
Jack Gazzo, owner of Property Appraisal & Consulting Inc. in Biloxi, isn’t all that sure those government figures reflect what is really happening in his region.
“I don’t know where they’re coming up with that,” said Gazzo. “Different pockets in different locations (have gone up) but some are about the same.”
Gazzo pointed out that according to his information sources, property values in Waveland, which was particularly hard hit by the winds and storm surge in August 2005, have declined.
The surge of buyers that followed the storm surge, Gazzo explained, prompted the rise in property prices elsewhere.
“In neighborhoods not severely damaged,” Gazzo said, “people who had the means gobbled the homes up.”
At this point, Gazzo said those property prices are leveling off and properties that a year ago were sold in a matter of days “are sitting longer now and sellers are having to come off their prices.”
Gazzo sees a bigger problem looming for the Gulf Coast: rising property insurance premiums. “It’s going to hurt our rebuilding efforts,” he predicted. “Everybody is aware of the problem.”
He appraised one home, four miles north of Interstate 10 and well away from the Gulf of Mexico, for $200,000; the insurance premium came in at a startling $5,000 per year.
“There’s no way,” Gazzo lamented, adding that his business has been hurt by staggering insurance premium increases in the region when potential buyers find out what they’ll be paying. “I’ve had appraisals cancelled, Realtors have lost commissions and sellers have lost sales.”
Ironically, Gazzo said that list includes insurance companies not selling policies.
Tim Barrett, a broker with Pelican Real Estate & Development in Biloxi, came to the Mississippi Gulf Coast from Destin, Fla., one month before Katrina hit. He said Destin’s inflated property values, which have since fallen along with many other U.S. markets, helped him with his decision to relocate.
“I see this market,” said Barrett, “as the beginning of Destin or Panama City 10 years from now. We have all they have, plus gaming. You’re going to see an incredible amount of development.”v
Katrina, it seems, provided a practically clean slate from which to begin working.
Barrett said “it’s not going to be uncommon to see 300% price increases in a few years” along Mississippi’s coastline.
As for rising property insurance costs, Barrett said it’s probably best to get used to it; the Mississippi coastal market is merely catching up to the rest of the Gulf Coast; owners of $300,000 homes on Florida’s coast, Barrett pointed out, have been paying $10,000 annual premiums for years.
“It’s growing pains,” said Barrett.
“There’s been an increase on everything from every company,” reported James Bunnell, who co-owns Gulfport- and Biloxi-based Worldwide Insurance with his wife, Mary Ann.
He said their business is “pretty steady” and considers himself “personally lucky” in that their home and business were relatively unscathed.
Bunnell said that finding companies to underwrite policies along the Coast has been difficult but is improving: “We’re starting to write a lot of flood insurance. We finally found a company that would write it.
“The others left the state.”
On just about every line of insurance purchased on the coast, Bunnell said “rates have doubled, at least.”
Carolyn Handler, broker associate for Arlene Wall Realty in Biloxi called Hurricane Katrina “a mountain I hope we never have to climb again.”
She said the “immediate reaction” of virtual impulse buying of property immediately after Katrina is over. “Now the market is starting to adjust to market demand,” said Handler.
The real buying frenzy, she noted, came to an abrupt halt in July. Handler is not sure what caused the sudden slowdown, which has brought the coastal real estate market nearer to its normal pace.
“We’re now back to the usual 90- to 120-day sale time,” Handler said.
Asked if she thought the government estimate of a nearly 25% increase in property values in the year after Katrina is accurate, Handler declared, “Absolutely.”