29 May 2009

New Orleans asks: What recession?


NEW ORLEANS —— Chicago is “a wash,” says Jason Weyland, an architect who lost his Windy City job when his firm cut half its workforce earlier this year. So on this day Mr. Weyland - married, bespectacled, and crisp-suited - is on a job hunt in a city that, just a few years ago, many Americans had written off, irrevocably sold down the mighty Mississippi.

“It’s hard to believe, but New Orleans has become a legitimate city,” he says, riding the St. Charles Streetcar line to a promising follow-up interview. “It’s got jobs, great culture, history, and it’s a city where people walk, which I like.” As the anchor of Louisiana - the only state with positive employment numbers - New Orleans is back.

Drawn by its walkable streets, antique neighborhoods, and laissez-faire regulation, young American workers are flocking to the Big Easy to stay, sensing an opportunity to redraw the economy and at the same time be a part of something bigger: rebuilding the only major US city to be completely devastated by a hurricane.

In many ways, it’s a stunning and irony-laden turnaround for a city whose deep social inequalities were laid bare when hurricane Katrina flooded it 3-1/2 years ago. It’s too early to tell, though, whether New Orleans can build an urban economic model to help lead the nation out of its economic doldrums - or will wind up spinning downward on the tail end of the recession.

“New Orleans tends to zag when other cities zig,” says Michael Hecht, president of Greater New Orleans Inc., a regional economic development agency. “We’re zagging pretty good right now.”

“Think of it as the third act of our redemption story,” he adds. The irony “is that while the rest of the country is mired in recession, we have a chance to leapfrog and lead the country out of this economic mess.”

To be sure, New Orleans is far from perfect. It’s still the country’s murder capital, and social inequities and the failure of many poorer residents to return are evident in the weed-choked and snake-infested desert of the Lower Ninth Ward, where nearly 700 people died after Katrina roared ashore on Aug. 29, 2005. At the same time, tens of billions in federal recovery aid, along with state ethics reform and business-friendly tax packages courtesy of Republican Gov. Bobby Jindal, have hastened the city’s progress, some economists say.

The city’s relatively low population compared with that before Katrina has helped keep unemployment low, though the total workforce - 527,000 in the 10-parish greater metro area - still hasn’t reached 1980 levels.

The $14.4 billion federal levee-improvement project, a new $3 billion refinery on the city’s west side, the $500,000 renovation of the Jackson Barracks military base, and a $60 million downtown residential complex called 930 Poydras are all bucking the dreary national total for construction, which is down 13 percent from early 2007. Add to that a key port and a largely recession-proof shipbuilding industry that services mainly the Navy and the energy industry, and it becomes clearer why the city has been able to skirt economic, if not natural, storms.

“Among the places in the US that you can go, [New Orleans] is going to be one where there may be greater opportunities for employment,” says Baton Rouge economist Loren Scott, a veteran tracker of the New Orleans economy.

But entrepreneurs in New Orleans say the real reason the city has outperformed expectations is the human capital that has flowed into the city: a great migration similar to ones that cities like Portland, Ore., saw in the first half of this decade — young, highly educated, and socially conscious risk-takers looking for a “livable city” to make their marks on the world.

Some signs: Tulane and Loyola universities, despite recent hurricane shutdowns, are seeing record enrollments, and the anecdotal evidence is that many graduates, instead of leaving as they often did in the past, are sinking roots.

Two years ago, Fast Company magazine ranked New Orleans as one of the five slowest cities in the world, alongside Budapest. This year, the city had catapulted to become one of the world’s five fastest cities, according to the magazine’s editors. Despite risks of the recession overcoming the state’s gains (in March the metro area lost jobs - 1,100 - for the first time since Katrina), some economists expect Louisiana to have a net gain of 1,300 jobs by the end of the year, at a time when employment has been skidding in cities such as New York, Atlanta, Chicago, and San Francisco.

In late April, two major rating agencies upgraded New Orleans’s municipal bonds to investment grade for the first time since hurricane Katrina hit, citing “the city’s generally improving financial profile.”

Tourism and convention business has shown continued growth, partly based on what locals call the “AIG effect”: a rejection in corporate America of glitzy junkets in favor of “volun-tourism,” where convention attendees can spend a day helping citizens rebuild the city.

That sentiment has also spread to corporate investment in local businesses hoping to sell franchises, such as the all-organic Naked Pizza company.

And aside from Mardi Gras and Jazz Fest - both of which have boomed in the past two years - the city counted 14 neighborhood festivals on a recent April weekend, as this late-night city seems determined to roulez through the recession.

New Orleanian Scott Couvillon, who helps run a new “un-junk mail” marketing service called Dukky, says the city has become “an entrepreneurial petri dish” because of several factors: hands-off regulation, and “empathic” young people looking for opportunity and a “coarse existence” in a place famous for its paucity of social and city services.

In a warehouse in a run-down neighborhood on St. Philip Street, Robbie Vitrano has created a laboratory of his own: Dozens of websites are running here as part of his ad agency’s “venture marketing” effort helping start-ups conquer market share. Young cultural anthropologists and former corporate raiders work in an open, newsroom-style environment, overseen by a “Jolly Louis” flag - a version of the pirates’ skull and crossbones, showing Louis Armstrong against a backdrop of crossed trumpets.

“New Orleans has become a destination for a generation asking: ’What’s next?’ ” says Mr. Vitrano.

Katie Del Guercio left a corporate job in Los Angeles a year ago to find more meaningful work. She volunteered in New Orleans for three months and, after leaving for a trip to Europe and a stay with her family in New Jersey, she made up her mind: New Orleans would be her home.

“The city feels like a college campus for grown-ups trying to make things happen,” says Ms. Del Guercio, a manager with a progressive job-matching service called Koda.

Many city observers aren’t surprised. Errol Laborde, a local bon vivant and editor of New Orleans Magazine, likens the city’s comeback to two other historic milestones: the period right after the Louisiana Purchase and the tail end of Reconstruction, when thousands of people emigrated from the East Coast to find their fortunes in Louisiana.

“We’re seeing a similar combination of new money and a pioneer spirit in New Orleans today,” says Mr. Laborde.

But there are still concerns about the city’s current state of affairs and direction. Housing advocates say that in the process of courting a new workforce - whether college grads from other cities or Hispanic laborers - the city has focused less on helping the displaced and largely African-American population plug into the new jobs dynamic.

And while new apartment complexes are going up with the help of federal and state tax credits, the hardest-hit areas - the Lower Ninth Ward, New Orleans East, and Holy Cross among them - are still struggling to rebuild.

But even on the racial disparity front, there’s some good news: The city’s focus on charter schools is paying off with test scores showing a narrowing racial gap. “There’s a disconnect between the reality of the economy in New Orleans and the wage structure of the jobs it provides,” says New Orleans-based Kalima Rose, a senior associate at PolicyLink, a national advocate for housing equity.

But she’s also optimistic. “I’m thinking we’re going to see over the next four or five years a continued return of neighborhoods and historically displaced people who want to come home but are still trying to organize how to get the resources to do it,” she says.

As far as lessons learned, experts say, New Orleans does give a glimpse into how federal aid - whether recovery money or a major stimulus package - can spark localized growth.

On the other hand, Washington’s current policy trajectory - higher taxes for the rich and added regulation for industry - seems to run counter to the Louisiana experiment, which is largely based on lower corporate taxes and less regulation, especially for entrepreneurial enterprises.

Still, New Orleans can offer at least one glimpse into how to recover from an economic shock: In a word, insouciance, says Richard Sutton, a banker-turned-royal-cheesemonger-turned-New Orleans entrepreneur.

“Historically, New Orleans people don’t necessarily care what the rest of the world thinks or does,” says Mr. Sutton, whose St. James Cheese Co. has grown rapidly since he relocated here from London after Katrina. “People here are really asking: ’What recession?’ ”

27 May 2009

Chinese Drywall -- How Can You Know?

If you are going to have any home "tested" for Chinese Drywall, please use EXTREME caution. We do not allow our Licensed Home Inspectors to "test" for Chinese Drywall. There are simply too many variables and way too much information (some correct and most incorrect) circulating about Chinese Drywall.

Testing can be complicated. The time the drywall was shipped to the home, installation of the drywall product, humidity or moisture in the air currently and the type of repairs needed, can each affect the test results.

An initial, intensive screening (performed by a microbiologist or other qualified personnel) should be undertaken in each room of the house. This screening should include air sampling both inside and outside of the home, including inaccessible areas like inside wall cavities and the attic. It should incoporate visual inspections of corrosion that may confirm a serious condition. It should also include a health profile in order to identify physical reactions by occupants to contaminants inside the house.

Upon completion of the screening, the client should receive a verbal explanation of the results and a copy of the screening report (this document will be critical should any legal claim progress). The client would know at that point whether the home contains contaminants from Chinese Drywall and the extent of the problem, should it exist. If there is a problem, the client should contact an attorney. Based on the level of contamination, the client may consider vacating the property.

If you don't have an attorney, we can recommend one of several local attorneys handling Chinese Drywall litigation. We will recommend that the attorney contact us so that we can discuss the estimated cost to remediate the property versus the cost of the full Chinese Drywall test. This additional testing is required to prove the claim in court. Understand that in order to comply with laboratory requirements in a full test, a 12" x 12" sample of drywall must be taken from each spot at which the compounds were registered. Each sample would be at a prepaid cost to the homeowner of between $1,200 and $1,800 per sample, plus labor. Because the sample size is 12" square, substantial disruption to the house will occur as a result of the testing. We are concerned that gases, previously inside the walls, now have a means of escaping into the home, entering breathing space and potentially complicating health issues.

We are prepared to support our finding in both Federal and State court. Both the President of our company and our Microbiologist are classifed as "expert witnesses" in either court.

Our concern is first and foremost, the client's safety. Please make sure qualified people are performing appropriate tests to determine if a hazard exists. Call us at 504-486-8500 for more information.


Mit Miller

Office Manager

Gurtler Brothers Consultants

08 May 2009

Mortgage Rate Drop Fuels Refinancing Boom

Home loan borrowers are cashing in on historically low mortgage interest rates as a refinancing boom gains momentum.

National mortgage refinance statistics jumped again for the last week in March -- up 3 percent from a week earlier and up 68.8 percent for the week ending March 27, on a year-over-year basis.

That news from the Mortgage Bankers Association represented a glimmer of hope for those waiting for a real estate market turnaround.

Borrowers making 20 percent down payments, for example, were able to qualify for 30-year fixed-rate mortgage rates of 4.61 percent on an average, down from 4.63 percent the previous week. Point -- an upfront fee mortgage companies charge for a specific interest rate -- also decreased to 1.03 from 1.13, including the origination fee.

That rate, the MBA said, is a new record low for the survey, which dates to 1990.

Most Road Home applicants choosing to stay in region

Most Road Home applicants in the New Orleans area continue to choose to stay in the region -- or at lease keep their property -- according to the latest figures from the recovery agency.

Of the 137,112 applicants in the New Orleans area as of March 26, 101,275 have chosen to keep their home, while 13,684 opted to sell and stay in Louisiana and 2,214 chose to sell and leave the state.

Orleans Parish had the most closings statewide with 44,343, representing 35.9 percent. Jefferson Parish was second with 24,028, and Calcasieu had the third most with 12,478.

Other New Orleans-area parishes report the following closing totals through late March:

  • St Bernard - 11,438
  • St Tammany - 10,711
  • Plaquemines - 2,928
  • St John - 1,181
  • St Charles - 943
  • St James - 357

The New Orleans area consists of Jefferson, Orleans, Plaquemines, St Bernard, St Charles, St James, St John and St Tammany parishes.

State hikes elevation grant limit to $100K

The state is increasing the maximum size of elevation grants funded by the Hazard Mitigation Grant Program from $30,000 each to $100,000.

The program is funded with $750 million in HMGP money from the Federal Emergency Management agency to provide gap funding for homeowners who are raising their homes after hurricanes Katrina and Rita and whose elevation costs exceed the amount of funding The Road Home program provides them.

"It will definitely help because a lot of people had thought about raising but haven't because they couldn't afford the difference between $30,000 and what it would cost them (to raise)," said Marge Garvey, New Orleans Metropolitan Association of Realtors president. "I think for people who are worried about buying a slab, it will help sell the property."

Letters have gone to 3,366 homeowners in the the program about their eligibility, notifying them of the change. Another 25,000 letters will be sent out by the middle of May.

Foreclosures Grow Locally, Impact Minor

Real estate agents tracking whether home seizures will decrease property values.

In the numbers game of foreclosures, Louisiana has been bucking the trends in some areas and leading the nation in others.

As the statewide number rose 40 percent from 485 in January to 678 in February, foreclosures nationwide rose only 6 percent from 273,193 to 290,631, according to Irvine, Calif. - based RealtyTrac.

But while Louisiana far outpaced the nation during that time, local experts agree foreclosures are making limited waves in the comparatively healthy New Orleans real estate market.

"In the marketplace we're in, foreclosures are an issue," said Ross Miller, president of Metairie-based Miller Home Mortgage. "We are doing more purchases in which the house being bought is a foreclosure. That is up probably 10 percent. Where we would maybe do one every six months, now we're doing one a month."

Any increase in the number of foreclosed properties can spark a chain of events leading to lower property values, Miller said.

Owners trying to unload a home to avoid foreclosure are left with rapidly diminishing options if prospective buyers lower their offers before foreclosure proceedings begin, which Miller said can reduce the final sale price. Since appraisers and assessors use a comparison of the sales price of similar properties to determine the value of homes in a given area, those artificially reduced sales prices can have an extended effect.

"When you are trying to appraise a current piece of property, the appraiser pulls up the comparables," he said. "If you've got a house that's 2,000 square feet and you're comparing it to a house that's 2,250 square feet that should have sold for $280,000 but it sells for $240,000, it brings the whole neighborhood down."

Ben Maygarden, chief deputy for the New Orleans 6th District Assessor Nancy Marshall, said the effects of foreclosures are limited by safeguards within the assessment process.

"We don't normally reassess everything every year," Maygarden said. "Theoretically, and there is a difference between theory and practice, you're supposed to use that quadrennial assessment appraisal for the next four years."

If a house appraised at $200,000 for the 2008 assessment is sold within four years at a lower rate for whatever reason, the original 2008 assessment should be used until the next assessment, Maygarden said.

"In practice it does change, but that wouldn't necessarily produce a change for anybody else," he said. "The way the system is set up, it limits the effect on property assessments in a normally appreciating environment. They didn't really envision a situation where you had dropping property values, so the theory doesn't work very well when prices are dropping."

Even though the 6th District sports some of the highest concentrations of foreclosures in Orleans Parish with 80 near the convergence of St. Charles and Napoleon Avenues, Maygarden said the number of homes in the district diffuses the overall effect.

"We have about 17,500 properties in our district, residential and commercial," he said. "That's about one half of 1 percent in foreclosure...If they were evenly spread out across the district, we wouldn't see that as a sufficient reason to do a reassessment."

Marshall said the ultimate effects of foreclosures are not reflected in current home values, showing the gap between the number of foreclosures and home assessments.

"The value of homes is going up in New Orleans, which is somewhat inconsistent with foreclosures," Marshall said. "It's really more of a real estate transaction than an assessment."

Maygarden said there is plenty of anecdotal evidence of sales prices dropping due to foreclosures but the rising home values don't bear out Miller's concerns.

"We can't use unsold property prices as data," Maygarden said. "We have to use what thing sell for, as we have not seen a significant decrease in sales prices. And if we have, it's only been very recently."

by Stephen Maloney