Volume 40,   Issue 10                          October  2005


Hurricane Katrina Has an Impact
On Building Materials and Prices

The full extent of the impact of Hurricane Katrina on the overall economy and on the housing market is still unclear, and the immediate focus is properly on human life and health, but the number of homes destroyed by this catastrophe is almost certain to dwarf the losses from any previous U.S. natural disaster, according to economists for the National Association of Home Builders (NAHB). Past experience, together with the visible devastation, provides some basis for projecting the effects on construction activity, the supply and cost of building materials and construction labor, and other implications for the housing market.

The NAHB estimated the number of housing units destroyed (made uninhabitable and beyond economically-justified repair) by Hurricane Andrew in 1992 at more than 28,000. The combined effect of Hurricanes Jeanne, Ivan, Frances and Charley in 2004 was almost as large, with nearly 27,500 housing units destroyed, according to estimates compiled by the American Red Cross. In those cases, most of the destruction was caused by winds or the immediate force of the storm surge. The number of homes with major but repairable damage was more than twice the number destroyed. 

Katrina also caused widespread immediate damage in Louisiana, Mississippi and Alabama, but the flooding in New Orleans, Mobile and elsewhere is likely to translate into much larger numbers of homes destroyed. Although the floods generally did not tear off roofs or walls or cause structures to collapse, many homes will be permanently uninhabitable, according to NAHB. The floodwaters carried contaminants that cannot be removed easily, and even if the water were clean, prolonged submersion would cause structures to be damaged beyond repair. This is likely to be the fate of a large share of the more than 200,000 homes in the city of New Orleans.

Of necessity, rebuilding will have to wait. The immediate need will be to clean up and repair damage to structures that are still viable. The repair process will absorb much of the construction labor near the affected area and several key materials that would otherwise have been used to build new homes, according to the economists. The materials that will be most affected include roofing and wood panels (plywood and OSB). Demand for other materials, such as concrete, is likely to decline initially, as planned projects are cancelled or delayed during the initial recovery period.

Economists predict that the storm will have effects on the supply of materials as well as demand. The areas affected by the storm have a significant number of wood product facilities that may have been damaged or destroyed. On the other hand, trees that have been blown down will need to be harvested on an accelerated basis, perhaps helping to lower wood product prices in the medium term.

Additionally, imports of building materials will be disrupted by the damage to port facilities, economists say. New Orleans was the top destination for imports of cement and a number of other building materials into the United States in 2004. Congestion caused by diversion of shipping to other ports will also probably disrupt some supplies of materials, as will land transportation problems caused by damage to roads, rail and reload centers.

Although the loss of tens of thousands of homes implies increased demand for, and construction of, new homes, past experience has shown that there is no massive surge in home building in affected areas. Replacing units destroyed by the storm will not begin for many months and will take place slowly, over a number of years.

IUPAT Raises Nearly $2 Million to Aid Members in Gulf Coast States
The International Union of Painters and Allied Trades has created the Finishing Industries Disaster Relief Fund to raise money and assist its 1,400 members in the Gulf Coast area.

IUPAT’s first order of business was to authorize a $1 million donation to the fund and call on its more than 140,000 members to make donations as well. Among member donations, District Council 21 in Philadelphia made a $100,000 donation. IUPAT says that with the many pledges and donations, even from retired members, the fund is quickly approaching the $2 million mark.

“Frankly, I’m not surprised that we’re getting such a response by our members,” said James Williams, IUPAT general president. “What has happened on the Gulf Coast is an unprecedented disaster and our people are facing not just the loss of work and a livelihood, but their homes as well.” He continued, “What you’re seeing is the union difference. This kind of support is what it means to be in a union.”

In addition to the IUPAT’s efforts, the union’s employees have also created a sister relief fund. The Finishing Contractor’s Association (FCA), which represents many IUPAT employees, has pledged to raise $2 million from its members as well. The FCA and IUPAT are also working together to create a national job bank for IUPAT members, and also provide shelter for those who will have to travel to work in these new jobs. 

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