September 13, 2005

Katrina to boost home demand, prices

WASHINGTON (Reuters) - Hurricane Katrina, which battered
the U.S. Gulf Coast two weeks ago, will have long-term
consequences for the housing market and economy, boosting both
home prices and construction costs as rebuilding gets underway,
a trade group said on Tuesday.

Total housing, commercial and public property losses by
Katrina total about $100 billion, the National Association of
Realtors said in its monthly economic forecast.

Rebuilding will put pressure on the already short-supply of
building materials, sending construction costs higher.

As building activity is focused on the hurricane affected
areas, housing inventory will remain tight nationwide, meaning
demand will continue to outstrip supply in most areas, the
group's chief economist, David Lereah, said.

Stubbornly low long-term mortgage rates will inch up even
more slowly than previously predicted, Lereah noted, due to
"post-storm economic conditions to accommodate the losses of
homes jobs and businesses."

He pegged the average 30-year fixed-rate mortgage at 5.9
percent for the fourth quarter, lower than his previous target
of 6.2 percent.

Lereah boosted his estimates of new and existing home sales
for the year, seeing records for both. He said resales of
previously owned homes should climb 3.4 percent to 7.02 million
units in 2005, up from last month's estimate of 6.98 million
for the year. New home sales should increase 6.7 percent to
1.28 million, up from his prior forecast of 1.26 million.

Total housing starts should hit 2.04 million units this
year, the highest since 1973 as single-family starts grow to a
record 1.69 million, the group estimated.