After Hurricane Katrina, the housing market exploded on the Mississippi Gulf Coast. So many homes and apartment buildings were destroyed that those still standing were able to fetch top dollar. If you had a house to sell, you were going to make a nice profit even if it had some damage. Fixer-uppers were getting new home prices, because so many people were desperate to find a new place to live, and many of them had insurance checks in hand.
My wife and I got married right after the storm and moved into a one-bedroom apartment, but when rent was going up to nearly $900/month after our first year, we decided it was time to buy a house. We began house shopping about 15 months after Katrina when the real estate market was at its peak. After visiting nearly every new neighborhood in Harrison County, we settled on a smaller place several miles north of the beach and nowhere near any kind of flood zone.
Our house is 1147 square feet with three bedrooms and two bathrooms, and we paid $127,000 for it. Prior to Katrina, the exact same house in my neighborhood would have sold for around $110,000-115,000. As a testament to how much prices were going up, our finished home appraised at $132,000. We were happy knowing we paid less than the appraised value, but little did we know how soon the bottom would fall out.
Just how much has the housing market changed in the past seven years since we bought this home? Right now, there is a house four doors down from mine that is listing for $90,000. Although my corner lot has a slightly bigger yard, that house and mine are virtually identical. I’ve upgraded my kitchen floors to ceramic tile and built a shed and fence in the back, but those improvements don’t add much to the overall home value. When I finally sell this house, I’m going to take a huge loss on it. I can forget about equity, at least not for several more years.
My brother and his wife were living in an apartment in Mobile, Alabama, when Katrina hit, and they bought a house around the same time my wife and I did. Two years ago, they sold that house for about a $15,000 loss, which wiped out a lot of the equity they built up. I consider them lucky for getting out when they did, because the value of their home would have continued going down. The Alabama coast wasn’t affected nearly as bad as Mississippi or Louisiana, but they still didn’t escape the real estate market fallout that has since spread across the entire country. What happened to us is happening everywhere.
The biggest mistake I made was buying new when I should have bought used. I could have saved some money getting a house that may have needed a little work, and in doing so I wouldn’t be in this position today. My wife and I are now stuck paying a note on a house that’s worth a fraction of what we originally paid for it. When we finally sell this house, our next home purchase will be like we are first-time buyers starting all over again. Hurricane Katrina may have destroyed my first home, but now because of the real estate market bottoming out, my house is “underwater” all over again.