From the National Association of Home Builders
The full extent of the impact of Hurricane Katrina on the overall economy and on the housing market is still unclear, and the immediate focus is properly on human life and health, but the number of homes destroyed by this catastrophe is almost certain to dwarf the losses from any previous U.S. natural disaster. Past experience, together with the visible devastation, provides some basis for projecting the effects on construction activity, the supply and cost of building materials and construction labor, and other implications for the housing market.
Katrina caused widespread immediate damage in Louisiana, Mississippi and Alabama, but the flooding in New Orleans, Mobile and elsewhere is likely to translate into many homes destroyed. Although the floods generally did not tear off roofs or walls or cause structures to collapse, many homes will be permanently uninhabitable. The flood waters carried contaminants that cannot easily be removed, and even if the water were clean, prolonged submersion would cause structures to be damaged beyond repair. This is likely to be the fate of a large share of the more than 200,000 homes in the city of New Orleans.
Of necessity, rebuilding will have to wait.The immediate need will be to clean up and repair damage to structures that are still viable. The repair process will absorb much of the construction labor near the affected area and several key materials that would otherwise have been used to build new homes. The materials that will be most affected include roofing and wood panels (plywood and OSB). Demand for other materials, such as concrete, is likely to decline initially, as planned projects are canceled or delayed during the initial recovery period.
The storm will have impacts on the supply of materials as well as demand. The areas affected by the storm have a significant number of wood product facilities that may have been damaged or destroyed. However, trees that have been blown down will need to be harvested on an accelerated basis, perhaps helping to lower wood product prices in the medium term.
Additionally, imports of building materials will be disrupted by the damage to port facilities. New Orleans was the top destination for imports of cement and a number of other building materials into the United States in 2004. Cement imports, in particular, involve the use of specialized terminal facilities. The New Orleans and Mobile customs districts reported about 12 percent of national cement imports in 2004.
Congestion caused by diversion of shipping to other ports will also probably disrupt some supplies of materials, as will land transportation problems caused by damage to roads, rail, and reload centers.