NEW ORLEANS (Reuters) - The real estate market in storm-ravaged New Orleans comes to a dead-end in a vast hall in the battered Convention Center, where 60,000 volumes that detail a century of mortgages are piled thigh deep.  
Police stand guard. Contractors have ripped up carpet and scrubbed the concrete floor of the urine and waste of stranded evacuees who sought shelter from Hurricane Katrina seven weeks earlier.
 
But searches of the still-unsorted records, which were rescued from a flooded courthouse basement, are required under a quirk of Louisiana law for all property deals to close.
The displacement of the thick books, which had to be sent to Chicago in refrigerated trucks for restoration and then returned to New Orleans, has shut down the local real estate market for two months, deepening the uncertainty over property values as New Orleans struggles to rebuild.
 
"This is really hampering the economic recovery of the city," said Arthur Sterbcow, president of realtor C.J. Brown, Latter and Bloom. "We've got every person's real estate in the city of New Orleans tied up in a knot."
 
The challenge of restoring crucial records in Orleans Parish is just one of the uncertainties surrounding the local housing market, as banks, insurers, realtors and homeowners struggle with unforseen questions.
 
Among the unknowns: How should appraisers judge home values? How will banks assess the potential loss of jobs in a still-reeling local economy?
 
How will insurers treat risks like toxic mold and a wobbly levee system? What happens to sales contracts pending before the storm?
 
And how will new mortgages -- once banks begin writing them -- be treated in the secondary market?
 
Home prices in nearby Baton Rouge initially shot higher after the hurricanes, as displaced residents bid up increasingly scarce housing, but experts said it was not clear that trend would continue.
 
"No one really knows. It's a period of great uncertainty," said Kelly Pace, head of Louisiana State University's real estate research institute.
 
Amid the boom in U.S. housing, prices had trailed in New Orleans, up just under 7 percent in the year before the storms, compared to a national average gain near 13 percent.
 
"The supply and demand balance just doesn't exist right now," said Michael Brown, chief credit officer of Iberia Bank. "I've been looking at the listing services to see where the market might be headed but there's no consistency."
 
For now, such questions remain "hypothetical" since Iberia -- Louisiana's third-largest bank -- has not not begun writing new mortgages in New Orleans, he said.
 
Like others, Brown said it will take the cooperation of agencies like Fannie Mae to set new standards so that property can be financed and redeveloped.
 
In the city's French Quarter, John Casbon was preparing on Friday for the return of his 130 employees at First American Title Insurance and concerned about the lack of clarity in the housing market.
 
"I think this is one of the top five issues the city is facing and it might end up being the most important," said Casbon, who is forming an informal group to study the problem.
 
In the impromptu records hall at the Convention Center, a group of search professionals, known as abstractors, sat at folding tables, ready to clear a backlog of mortgage-related work once needed indexes arrive.
 
Under Louisiana law, which draws heavily from French legal traditions, a search of public records is required to clear each property sale.
 
A mouse darted between a row of white boxes but conditions are better than they were. "It was like Jurassic Park in here at first with the flies," said Donna Olsen, an abstractor.
 
Stephen Bruno, New Orleans custodian of notarial records, is credited by Olsen and others with staving off a worse economic disruption by convincing federal officials to salvage the crucial volumes.
 
"Steve really did save the city," said David Shall, an abstractor. "It's hard to understand how the most vital records in the city of New Orleans were kept in the basement of a building below sea level."
 

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