New Orleans has post-disaster real estate lessons for San Francisco

This week's Surreal Estate column discusses why an earthquake would not bring housing prices back to levels that most people would find affordable.

"For all of you waiting for a major quake to bring the cost of housing down to a tolerable level -- to democratize this city of real estate haves and have-nots -- don't count your square feet quite yet. New Orleans has offered San Francisco an eerie glimpse of its possible future. In the wake of Hurricane Katrina, the Big Easy has become the site of another perfect storm. And I don't mean Rita, which as I write is rushing headlong toward the southern states -- I'm talking about the perfect storm of real estate madness."

"In fact, many real estate investors seem to have decided that New Orleans is the new land of opportunity. For two weeks now, Craigslist's New Orleans real estate listings have been inundated with offers from real estate investors from all over the country offering to buy New Orleans properties, whether they were flooded or not."

I've always thought that a strong, yet non-damaging quake could cause many to weigh their options and leave town, but there's still too much demand for that to really bring prices down. Besides, the folks that have been waiting since 1997 for things to crash will never see those prices again. Even the day after a catastrophic quake. We're too far gone for that to happen...

"Even though prices are already ridiculously high in San Francisco, one can imagine that a similar mind-set might prevail in the wake of the "Big One" -- especially since the frequency of catastrophic earthquakes pales in comparison to the potential for hurricanes in the Gulf Coast region. In this sense, real estate in the wake of disaster won't equalize so much as concentrate economic power in the hands of those with cash to risk."