Mississippi Gulf Coast Real Estate Market Conditions
Hurricane Katrina was our nation’s worst natural disaster – referred to as the “100 Year Storm”. It destroyed 64,000 homes and 47,000 rental units. But it also may have provided us with one of the greatest investment opportunities of our lifetime.
Prior to hurricane Katrina, the Mississippi Gulf Coast real estate market was showing significant strength due to the expanding casino market, expanding defense industry and baby-boomers looking for more affordable Gulf Coast living. In many respects it offered people a similar but more affordable lifestyle than Florida, at a substantially lower cost.
Following the devastation of Katrina, many construction firms concentrated on the areas needing immediate clean up and repair work. The Governor of Mississippi then announced that there was an urgent need for 100,000 new affordable homes to be built within the following 12 months. But the true rebuilding of single family homes in the area has only recently commenced. There were over 100,000 people living in FEMA trailers. Today 30,000 of those people still live in trailers, and another 40,000 families are living with friends and family due to the severe housing shortage.
Other factors contributing to the increasing housing demand in the Mississippi real estate market include the job growth from larger employers such as the Kessler Air Force Base, the Stennis Space Center expansion, the growing aerospace corridor, shipbuilding, growing international trade zones, and the overall Mississippi business climate.
Additionally, Mississippi changed its gaming laws to allow casinos to build 800 feet onshore. Many of the local builders were given lucrative construction contracts to repair and rebuild casinos. Contractors were hired to work around the clock to meet tight deadlines on getting the casinos up and running. Today the Mississippi gulf coast is the second largest gaming destination in the USA next to Las Vegas.
Recent economic studies show that the Gulf Coast area is recovering. Statewide, gross state product and employment have surpassed pre-Katrina levels and a reconstruction boom is anticipated for the next five years. Post Katrina employment growth in the state more than offset jobs that were lost due to Katrina. Retail sales in the twelve months after Katrina are 19% above pre-storm levels, indicating further strengthening in the economy.
5 Reasons To Buy Investment Properties In Mississippi Gulf Coast?
The casino industry is one of the largest employers on the Gulf Coast and is adding tens of thousands of good paying jobs to the area, but it's not the only industry that is thriving. The Mississippi Gulf Coast has a wide array of large employers representing industries from tourism to manufacturing. These employers are industry leaders such as Northrup Grumman, Chevron, Dupont, Triton Systems, GE Plastics, the Southern Company, Hatter Marine, Fried Goldman, and Oreck. Since 1941, a strong military presence on the Mississippi Gulf Coast has also contributed significantly to local employment and the economy.
As a result of fewer available employees for hire, labor rates in the area have increased significantly. Almost every industry throughout the region has experienced wage increases from construction companies to fast food restaurants. While most of the wage increases can be attributed to lack of housing and labor shortages, some of the pay increases have resulted from the need to compete with the hourly rates required by government contracts.
The recent demand for affordable housing has created significant growth in the local housing market. This has been driven by displaced residents wanting to return to the area, as well as the recovering economy in the coastal counties.
In October of 2006, MSNBC reported that the effects of Katrina may spout a Real Estate boom in Mississippi. Builders and developers entered the market for what looked to be a significant growth opportunity. Some developers focused on buying up whole blocks of destroyed homes south of the I-10 to make room for casinos, condos and entertainment complexes. Other developers are focusing on land north of I-10 that generally has a higher elevation and no lingering effects from the hurricane.
Most experts agree that the real estate boom has only started and may run for the next 3 to 5 years. Mark Cumbest, the Mississippi Real Estate Commission Vice Chairman, was quoted as saying that the Mississippi Gulf Coast is one of the best real estate markets in the country.
As an added incentive to investors, the state of Mississippi is offering significant tax incentives to invest in the area that were hardest hit by hurricanes. The combination of a high growth area, with the opportunity for appreciation and added tax incentives, make investing in Mississippi an attractive option for real estate investors.
According to the OFHEO.gov House Price Index, the Biloxi-Gulfport metropolitan statistical area appreciated 6.02% year-over-year for the fourth quarter 2007, and 12.9% year-over-year for the fourth quarter 2006.
Population projections furnished by the state of Mississippi show the Gulf Coast area population will continue to increase. The increase in baby-boomers moving to the area as well as the additional demand for workers in the casino and aerospace & defense industry are all positive factors supporting growth.
Despite the devastating impacts of Katrina, the Mississippi Gulf population has greatly rebounded from the population decline suffered directly after the hurricane. Some of the population had shifted to northern counties as rebuilding was taking place in the Gulf Counties. As more affordable housing is created, residents will return to the Gulf Communities which are closer to the employment base and the Gulf beaches.
4. The GO Zone
The Gulf Opportunity Zone (GO Zone) Act of 2005, signed into law by President Bush on December 21, 2005, contains significant economic incentives to rebuild the Gulf Coast, as well as to attract new investments to the affected areas. Modeled after the Liberty Zone incentives created after the 9-11 disaster, these incentives are intended to stimulate private investment within the GO Zone within the window of time provided.
These economic incentives are so significant that any person considering an investment in the GO Zone should learn how to employ these incentives to the fullest extent possible. The most significant incentive in the GO Zone Act for real estate investors is the first year 50% Bonus Depreciation. You should consult IRS Publication 4492 or your tax professional as your personal circumstances will vary.
5. The Opportunity
Investors believe that Katrina is only one of the factors that should lead to an excellent real estate opportunity in the years to come. Other factors are the continuing expansion of the casinos, jobs created by the expanding aerospace & defense industry and the migration of baby boomers to lower cost warm weather spots near the Gulf.
As with all investment opportunities timing is everything. Demand for affordable housing has created significant growth in the Mississippi housing market. The real estate boom has only begun and may run for the next 3 to 5 years. Are you going to miss this once in a lifetime opportunity?