Lessons From Katrina for a Devastated Houston

New Orleans real estate pros offer a long view of disaster recovery, recalling their own role in reviving the community and housing market.

Hurricane Harvey’s ruinous path through Houston and its environs evokes memories of the 2005 storm that overwhelmed New Orleans. Both hurricanes, Katrina and Harvey, produced searing images of people trapped on rooftops, waiting to be rescued from their homes by boat or helicopter. Katrina displaced more than a million people, as some 275,000 homes were damaged or destroyed in and around New Orleans. FEMA provided assistance to nearly a million households after Katrina.

While experts estimate that flood damage from Harvey could total $35 billion—about the same as Katrina—one big difference is the more limited number of homes covered by flood insurance in Houston. Much of the impacted region did not fall within designated Special Flood Hazard Areas that are eligible for coverage under the National Flood Insurance Program. Only about 20 percent of those affected by Harvey were covered, compared to about half of flooded homes after Katrina.

For insights about what the recovery and rebuilding efforts in Houston might look like—and what those in the path of Hurricane Irma may be facing—we spoke with real estate pros in and around New Orleans who stuck with their business through Katrina and its aftermath. The agents and brokers offered immediate assistance to the newly homeless and played important roles in the long process of getting individuals—and the real estate market—back on solid footing. They offer lessons about resilience and persistence that are important traits for practitioners coping in a storm-ravaged area as the community assesses the damage and the way forward.

The Immediate Aftermath

Stephanie Brouillette, ABR, a sales associate with Conchita L. Sulli & Assoc. Inc., in Kenner, La., about 14 miles outside of New Orleans, saw her real estate business nearly vanish in the first six months after Katrina. But she stayed busy by performing broker price opinions for banks who were assessing the market value of damaged homes. She handled about 10 BPOs per week, earning $50 to $75 per job.

Mary Vastola of Coldwell Banker TEC, REALTORS®, also took on BPOs but recalls the difficulty in doing them in areas that no longer had street signs. “You had to drive into the neighborhood on a major artery and then just count blocks," she recalls. Sometimes the homes she went out to evaluate didn’t even exist anymore.

Local and state REALTOR® associations quickly provided agents and brokers with opportunities to help owners get up to speed about grant and loan programs to help with recovery and rebuilding. “You want to stay in touch with your board, because your customers aren’t going to know what assistance is available,” says Brouillette, who completed the required course authorizing real estate agents to work with customers in need of such help. “One of the programs we had was offering $65,000 in grants [per household]. “The program was through the Finance Authority of New Orleans, using funding that was given to us to help get people up and running.”

Just prior to Katrina, Keller Williams Realty agent Lynda Nugent Smith’s business was robust. Her company had about $3 million pending in lot sales in a subdivision development near the New Orleans airport. But after the storm, every single one of those deals was canceled by prospective buyers. “They just didn’t know what was going to become of their lives, their businesses,” says Smith, CRS, GRI. “They thought, ‘At least I can get this money back.’”

The work environment was challenging, but she and her colleagues persevered. They’d gotten four or five feet of water in their office and had to work out of FEMA trailers in the parking lot. “We were happy to have them. We were a little cozy,” Smith recalls. “But there were so many people in need, you had to get to work and help them.”

Notwithstanding the difficult months ahead for Houston, agents can expect business opportunities to increase, starting with the homes that avoided storm damage. “What happened was, the inventory that didn’t get damaged became a very hot commodity,” Brouillette says. “Prices really went crazy. A rental that was maybe $700 prior to the storm, all of a sudden was $1,200 or $1,600 because it wasn’t damaged. And that caused a lot of issues in our area. But that’s what happened. We had a lot of people moving from one area to the next.”

Remediation Concerns

When transactions began to ramp up in New Orleans, Brouillette says, it became important for sellers to have clear documentation of the repair work they had done. Otherwise, buyers would balk. “Sellers are going to have to be very honest with their disclosures and make sure they’re actually getting certificates and getting the house cleaned,” she says. “That was one of the concerns a lot of our buyers had. What was done to this house? Did they have before-and-after pictures? Was everything pulled out or was it just cleaned and repainted? Insulation, Sheetrock—everything had to be done [appropriately]. You couldn’t just treat it with bleach.”

Frank Trapani, CRS, GRI, managing broker for Latter & Blum Inc., REALTORS®, in suburban Metairie, La., also found high levels of buyer skepticism when people started looking at remediated properties. In Katrina’s aftermath, when he was working with colleagues in his company’s New Orleans office—which was submerged in roof-high water after the storm—a labor shortage made it difficult for homeowners to find contractors to remove mold and fix broken windows. Many did it themselves. “I told my agents that whatever their sellers’ means were for mold remediation, they needed to get it certified and take detailed pictures of all the work that was done,” Trapani says.

Eye on Flood Insurance

Close examination of flood insurance policies has become a top priority in Smith’s work as a listing agent. “Is it a good, subsidized rate, or is it at a rate that’s going to make this house difficult to sell?” she says. “That was not my first question prior to Katrina, but now it is. It can mean the difference between whether somebody qualifies for a loan or not.” She also conveys to sellers how necessary it is to be sure their flood insurance has been paid and is up-to-date. Homeowners who fear their repairs could exceed the $250,000 cap for NFIP payouts would be smart to obtain additional coverage in advance, she says. For Smith, it’s all about “staying in touch with your sellers and your buyers and just reminding them of where we are in life and having them be prepared.”

Besides determining whether sellers have flood insurance, Vastola immediately seeks to find out whether homeowners’ premiums have been grandfathered in. Otherwise, the cost might be too expensive for prospective buyers, putting a transaction at risk of collapsing.

Agents who can persevere will have a bright future. “It will get better,” Brouillette says. “Programs will be coming out to help kick-start things. The hardest thing is seeing how tough it is now, knowing that it is going to eventually be positive. We ended up getting better schools, our old housing stock improved, sales took off, but it’s hard to see it at this point.”

Trapani sees this as a critical time for Houston real estate brokerages to be a guiding force for their agents in Harvey’s aftermath. He recalls calming nervous agents at his own company and helping them to stay the course after Katrina. “As a manager, being able to communicate to agents that this is a rough spot and a temporary setback but we will make it through—it’s what they needed to hear,” Trapani says. “You and your agents need to be a sounding board for people, and you need to position yourself with knowledge about what the community needs to do to rebuild. You’ll develop lifelong friends and clients.”

It’s also crucial to be prepared for next time. “I have a plastic box packed with all of my important papers in it—cash, phone numbers,” Smith says, “We have learned you want to be able to pick up your box and go and not have to be thinking about it.”

As members and staff of the Houston Association of REALTORS® grapple with the next steps in their recovery, their own role as a support system for tens of thousands of New Orleans evacuees may seem like another lifetime. During Katrina, when Houston took in more than 100,000 evacuees, HAR built an online platform for people searching for rooms. “It helped people looking for shelter find available space. I recall we had an apartment complex owner who donated 300 units that were sitting vacant,” says Matt Burrus, HAR’s chief communications officer. The association is looking to get that platform re-established as soon as possible. “It’s a little more complicated since we’re the ones affected,” he adds. But before long, he’s optimistic Houstonians seeking temporary housing will be able to find help at HAR.com.

REALTOR® Magazine staff writers Wendy Cole, Robert Freedman, Stacey Moncrieff, Meg White, and Graham Wood contributed to this report.