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The aftereffects of Hurricane Katrina are still reverberating across the Gulf Coast real estate market, creating mini-booms in areas that were spared the worst damage and slowing sales to a crawl in the hardest-hit communities.

Mississippi's coastal Hancock County is a microcosm of what's going on throughout the region, with much of the sales activity shifting toward Diamondhead, a town 15 miles north of the Gulf that was left in relatively good shape. "The residential land prices in the north end of the county, above the Interstate, probably will have doubled in the last six months," said the county's Chancery Clerk Tim Kellar. "That is the result of folks leaving the south end and going north."

Meanwhile, the waterfront cities of Bay St. Louis and Waveland have few habitable homes left for sale, leaving real estate agents to market little other than gutted-out houses or vacant lots. From December through mid-March, only 13 single-family homes were sold in the two cities through the Multiple Listing Service, although a handful of other homes likely were sold directly or before they made it to the listing service.

A similar pattern has been seen across the Gulf Coast, resulting in minor booms in places like Baton Rouge, La., Hattiesburg, Miss., and inland areas of the Gulfport-Biloxi region.

For those deals that are getting done, prices seem to be roughly comparable to what they were before the storm, real estate agents say.

"Values are probably equal to what they were pre-storm, and 2005 was our best year even with the storm," said Herb Dubuisson Sr., president of Coldwell Banker Alfonso Realty in Waveland. He said business seems to be picking up a bit in recent weeks.

Gutted houses changing hands

It is hard to say exactly how prices are holding up because there have been so few sales of homes in move-in condition. Most residential sales have been for gutted-out houses, some of which sell for little more than the value of the underlying lot. All told, nearly 11,000 homes were destroyed in Hancock County, which had only about 43,000 residents to begin with.

"Those houses that are damaged but repairable are the main thing that’s selling now," said Dubuisson. "Very, very few of the undamaged homes are being sold."

After factoring in the estimated cost of repairs, those gutted houses are selling for about pre-storm prices, he and other agents say.

A gutted three-bedroom, two-bathroom home in Waveland, featured previously on MSNBC.com, recently sold for $83,000, compared with a pre-storm value of about $130,000, said real estate agent Chari Rapp. A "very, very nice house" in Bay St. Louis, which would have sold for $275,000 before the storm, recently went for $115,000, reflecting the substantial repairs needed, said Dubuisson. The lot alone was worth about $45,000, he said.

Vacant lots, particularly those along the water, seem to have held their value. On North Beach Boulevard in Bay St. Louis, where waterfront properties were scoured clean of any structures, one typical lot is listed at $395,000.

"The waterfront properties -- I don’t care if it's canal, river, bayou, bay or Gulf of Mexico frontage -- they have retained their value," said John Harris, an associate at Latter & Blum in Bay St. Louis. He said residents – and developers – are drawn to the water despite the lingering horror of the hurricane, which killed 53 people in Hancock County and more than 1,300 overall.

While prices may be comparable, there is no comparison with the level of interest and activity that prevailed in the months before the storm, said Harris. "Before the storm the real estate market was at its peak," said "Everything that wasn’t nailed down was selling."

Damage doesn't necessarily deter buyers

Many sales that were pending before the storm failed to close, generally because the property was badly damaged or destroyed. But some of those deals were put back together later at reduced prices. Harris mentioned a waterfront property in Pass Christian that was in contract for about $1.9 million that sold after the storm for $1.3 million even though the home was completely destroyed.

"I said, 'Are y'all aware we had a hurricane?'" Harris said.

One thing that appears to have survived the storm intact is the phenomenon of Old Town Bay St. Louis, where homes command a significant premium over similar properties elsewhere in the area. The commercial section of Old Town, closest to the water, sustained heavy damage, and officials have not yet determined how to rebuild it. But the residential section of the neighborhood was spared the worst ravages of the storm.

Read previous related story: Real estate market meets cold reality

"There's still some of the charm left in this little area here," said Nancy Sorak, an artist and retired municipal judge who recently bought a two-bedroom, two-bath cottage for $175,000. The roof, damaged by Katrina, had been replaced, but ceilings in two rooms still needed to be repaired.

Nancy Sorak faces minor post-Katrina repairs in the two-bedroom cottage she recently purchased in Bay St. Louis. (David Friedman / MSNBC.com)

Sorak described the repairs as minor and said conditions were far preferable to what she faced at her former house in Waveland, a century-old converted one-room schoolhouse that was destroyed by the storm.

Fleeing a 'war zone'

"(Here) I can look out and I can see green," she said. "If I lived in Waveland, I would just be in a war zone. I might as well be in Iraq. This is where I plan to live."

Harris marvels at some of the prices paid for homes in Old Town, both before and since the storm. "You can’t imagine the excitement that was here before the storm," he said, citing as an example a planned 1,300-square-foot condominium near the beach that sold for $625,000 even before construction started. That project fell through, but more recently a three-bedroom house in Old Town that was rehabilitated to "pristine condition" after getting six inches of water in the storm sold for about $400,000, comparable to its pre-storm value, Harris said.

Harris himself has contributed to the excitement of Old Town. The 68-year-old New Orleans native lived for many years in Pass Christian before setting down roots in Bay St. Louis, building an impressive 3,200-square-foot home on Main Street, not far from the Methodist church with its storm-toppled steeple. The gracious home with its seasonally decorated moose on the lawn was completed only five years ago, but it has the look of a much-older building. Inside the house is crammed with paintings, overstuffed furniture and collections of glittering china, jewelry, silver and crystal, giving it the comfortable look of a place where guests are common and welcome.

With its 10-foot ceilings, two master suites, large open kitchen and four bedrooms, Harris and his partner "overbuilt the neighborhood" by $200,000, he said. But now the market has caught up, driven in part by the thriving art scene that has coalesced around the old core of the city. Harris is getting ready to put his house up for sale, asking $845,000. The house sheltered seven people from Katrina and has been completely restored since taking on just an inch and a half of water in the storm.

Harris and his partner plan to spend summers in Upstate New York and winters in Bay St. Louis, where they plan to build a new, smaller home on property adjacent to their current residence.

"I’m not giving up on Bay St. Louis," he said. "Bay St. Louis, Waveland, Pass Christian were just wonderful communities – great lifestyles, very artsy, good politics, good times, good food, beautiful plantings. And it will be back."

Health concerns remain

Still, there is no doubt that the market presents certain challenges to a real estate agent. Some privately question whether a house that has taken on several feet of water can be fully rehabilitated, even with bleach treatments and new Sheetrock. Many residents still suffer from a hacking cough they blame on Katrina and wonder about the long-term potential for mold.

In Waveland, there is little habitable property to sell, although Harris recently listed an unusual property with seven bedrooms, four and a half bathrooms and 5,300 square feet. The structure was formerly home to a Mormon couple and their 13 children, Harris said, although with his Realtor's imagination he said it would be perfect as a bed and breakfast.

"I really think if you build it they will come," he said, noting that the potential market of New Orleans is just an hour away. "People want to get out of New Orleans, even for a day."

Any new owners will have their hands full as the property took on 2 feet of water, and the lower floor has been gutted to the studs. The asking price is $335,000.

Despite such heavy damage, homes are holding their value in a simple demonstration of the law of supply and demand. People who are nervous about living in a hurricane zone seem to be far outnumbered by residents looking for a way to get back to the place they call home.

The state of the real estate business in the Bay-Waveland area is similar to what is being reported across the rest of the hard-hit Gulf Coast: The pace of business has slowed, but prices are steady to higher.

"There were a few cases of people in the very beginning who left here and moved to Diamondhead and made a big mistake: They sold too cheap," said Dubuisson. "Now it's settled down. There are not any so-called steals."

Demand for commercial space strong

In fact, demand for commercial space is relatively strong, he said, in part because contractors who are rebuilding the region need space to store vehicles and warehouses for their equipment and supplies. Contractors also are desperate for worker housing, meaning the residential rental market should be strong for several years, he said.

The observations of Dubuisson and others are consistent with a federal study released March 1 that showed real estate price increases in much of the Gulf Coast region after the hurricane, along with a sharp drop of activity in the most heavily damaged areas.

In the Gulfport-Biloxi area, for example, prices were up more than 8 percent in the final four months of the year, compared with the May-August period, according to the study by the Office of Federal Housing Enterprise and Oversight. Sales activity was down about 20 percent over year-earlier levels.

Even in New Orleans prices were up 6.5 percent in the months immediately after the hurricane – at least in areas that sustained the least amount of flood damage. In the areas of heaviest flooding, sales activity was down 95 percent.

"At the end of the day the price impact of an event like Hurricane Katrina will be a direct function of both supply and demand factors, and obviously Katrina took a lot of supply off the market," said Andrew Leventis, an economist with the federal agency who worked on the study.

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