Katrina and Home Prices

Driving to work early this morning, I saw an employee at a gas station changing the numbers for the cost of gasoline on the big sign out by the street. What was $2.63 per gallon yesterday was $1.69 today. Many are predicting that the devastating hurricane (Katrina) that just struck Mississippi and Louisiana will so disrupt oil refineries and off-shore wells in the Gulf of Mexico that the price of gasoline and heating oil will skyrocket. Many have already been predicting $3.00 per gallon for gasoline by the onset of winter, but the effects of Katrina may accelerate this increase. While there’s no direct link between energy and home prices, it’s extremely likely that a rapid spike in energy costs will have an adverse effect on home prices. Even before this storm, there have been many indicators that the housing market is slowing. Saturday’s Globe business section led with the following headline: “Number of unsold homes surges.” Other stories told of a slow down in single-family home sales but a continued strong market for residential condominiums. While a number of factors undoubtedly contribute to strong condominium sales, foremost among them have to be the affordability of condos when compared to homes. And in a slowdown, the high end feels the effects first. As if on cue, I had to interrupt writing this to wait on a customer at the recording counter. He had two sets of documents to record. One was a single Order of Notice to commence foreclosure proceedings, the other was a full fledged foreclosure with a certificate of entry and a foreclosure deed: a preview of coming attractions?