Lesson,Disguise,How,New,Orlean business, insurance A Lesson in Disguise: How New Orleans Avoided the Subprime M
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Recent attention paid to New Orleans and Louisiana has largely focused on Hurricane Katrina and the states attempt to recover from its widespread damage.No single state is impervious to a national financial crisis, but Louisiana is moving forward because it did not employ some of the more questionable loan strategies that were used by other states. This means that people who could make mortgage payments bought real estate in New Orleans. This means lenders did not grant unreliable loans. This means there was no bubble. This means New Orleans and Louisiana are on the right track, especially in the real estate market. The Times-Picayune ran an article recently about this blessing in disguise.While home prices soared to giddy heights in other states, owners in Louisiana have seen steady but unglamorous annual gains of 5 percent in recent years. As a result, lenders in Louisiana never resorted to issuing exotic loans designed to shoehorn buyers into homes they couldn't afford."We never had the inflated values, and we never came up with contrived funding mechanisms to support ever-increasing home prices not backed by real economics," said Arthur Sterbcow, president of real estate company Latter & Blum.Recently released figures show that those years of slow and steady growth in home values in Louisiana have insulated the state from the waves of foreclosures occurring in other states.This is a classic tortoise and the hare scenario. The nation zoomed forward, breaking records and making people rich. Then it crashed, its artificial energy spent, and in its wake left thousands of homes in foreclosure, on the market, or plummeting in value.Nobody wished the carnage of Katrina of New Orleans. But from disasters perseverance and lessons must be learned. New Orleans is not licking its wounds. It is working towards health. With an honest, conservative and rationale real estate market, it is on the way to recovery.Again from the article:Because so many home loans in this state are 30-year, fixed-rate mortgages with predictable monthly payments, owners tend to lose houses to foreclosure when the economy weakens and they lose their job, or when they suffer a personal calamity such as illness or divorce.The good news on that front: While the country as a whole lost 1.5 million jobs between October 2007 and October 2008, the greater New Orleans area added 9,600 jobs during that same period."We never had the economic disasters or tremendous layoffs that some states did," Sterbcow said. "The hurricane brought a lot of money into this area and has given us a false bottom. It has given us a bit of insulation from the economic downturn that exists in many other areas of the country." An additional positive result is for renters. Apartments are available for affordable rates because landlords and property owners are not panicked. And with more people staying in their homes, or buying new ones, that keeps the rental community vital and accessible.
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