Reasons Katrina would be a factor in prolonging the bubble:
- hundreds of thousands of homes were destroyed. Thus supply has been reduced and hence that causes upward price pressure
- Building materials increase in cost due to increased demand thus causing upward price pressure on new homes.
- The Fed decides Not to raise short term interest rates this month because of increased economic risks due to the hurricane
- People view housing as a more risky investment due to an enhanced awareness of natural disasters.
- Gas prices continue to remain high. People have less money to spend on housing.
- Economy suffers due to the hurricane.