New Orleans’ real estate market is going through a boom, as prices rise to above pre-Katrina levels. However, according to this NYTimes article, the boom is being led by investors and speculators who are placing huge bets that property values will come back .
The renewed interest in buying and selling and renovating has confounded some people who thought the flooding would cripple the housing market for years. But it is just one of many counterintuitive contrasts that are defining the area and making easy predictions unreliable.
Speculation might be frowned upon but it plays a vital role in the economic future of New Orleans because the city’s economic future is still uncertain. This uncertainty validates the role of speculation because if the property values can’t be sustained, those speculators will take a loss, and that loss will be a gain to the city of New Orleans.
The NYTimes also points out that this speculation activity also creates optimism– think Malcolm Gladwell’s Broken Windows Theory meets Post Katrina New Orleans.
So while speculators are sometimes frowned upon because they are making money from people’s misfortunes, their activity is economically important to the future of New Orleans.