There is no simple or necessarily correct answer so I hope people will comment. Some ideas are pure conjecture or maybe better put an educated guess. There is no doubt that the devistation caused by Katrina is horific but the real estate market (and the economy as a whole) may benefit in the coming years.
Interest rates were already at a historic low. The Feds are unlikely to push rates up as the need for low cost money will help drive the economy as it rebuilds the south. The dent in the current economy will be boosted by the jobs, goods and services created by the rebuilding in future years. Low interest rates should continue to support our rapidly appreciating economy. Throughout the ecomomic recovery of the last few years, low interest rates pushed the real estate market to levels never seen before.
We already have a tight housing market and some people who lost everything in Katrina will relocate out of the south. We have already seen this starting to happen on the local news and with an agent in our office.
New construction home prices will rise. The cost of building materials and their transportation will drive prices up. Qualified contractors will not be short of work. We saw this on a smaller scale in San Deigo after the fires. While the victims moved out, the construction workers moved in.
I had a long conversation with a client a few days ago that started with his view of an likely crash. I think that changed as we talked.