New Orleans realtor Delisha Boyd advises her clients they will be approved for home purchase prices approximately two and a half times their annual gross income.

The average price of a home in the New Orleans metro area is $354,880, according to a May report from the New Orleans Metropolitan Association of Realtors. Meanwhile the average wage in the metro area is $24.05 an hour, or $50,024 annually, according to the U.S. Bureau of Labor Statistics. A two-person income at those wages would only be able to mortgage a home for $240,000 – still $100,000 below the average sales price.

“You find a decent, move-in ready home below $250,000 in this market? Put your offer in site unseen,” said Boyd, realtor and owner of Delisha Boyd LLC. “Unfortunately, we have gotten to a price point where New Orleanians, particularly your first-time homebuyers and average wage earners such as your teachers or police officers, are being priced out of the New Orleans metro area and having to look at outlying areas to be able to afford a home.”

Slidell, Laplace, Prairieville, Gonzales and Madisonville have been several of the areas that Boyd has had to take clients looking for homes under $300,000. “But then you run into the problem of people driving 30-45 minutes to work and having to afford high gas prices,” Boyd said.

Craig Mirambell has a client who found a home in Luling for $250,000 and is driving 30 minutes to work.

“She tried to find a home in Metairie/Kenner, but it’s $300,000 minimum in our metro area to find a 2-3 bedroom, 1,600-square-foot house, and those either fly off the shelf or need updates and repairs that you need to be willing to do,” said Mirambell, realtor and owner of Mirambell Realty and NOMAR board secretary-treasurer.

Mirambell has another client whose principal and interest on a $300,000 home was $1,265 in December. Now, it’s $1,800.

Mortgage buyer Freddie Mac reported July 7 that the 30-year rate is 5.30%. One year ago, the average 30-year rate was 2.90%. The increase translates to a new homebuyer paying a mortgage note $240 higher each month than compared to last year.

“We enjoyed low interest rates and a high pace of buying activity for so long, but we have hit a wall, need to hit the reset button, so to speak,” Mirambell said. “There will be about a 3-6 month adjustment period for the market to restabilize. It will be interesting to see how home affordability improves and how the market reacts to all the varying factors. The best advice is keep having conversations with your realtor who has the best pulse on market availability.”

Homes unaffordable across the nation

New Orleans is mirroring a national trend of increasing home unaffordability amid high home prices, low inventory, rising mortgage rates and growing inflation.

National real estate data firm ATTOM has released its 2Q 2022 U.S. Home Affordability Report, showing that historic affordability has plummeted to a 15-year low as median home prices hit $349,000, with average wages sitting at $67,587. Nearly one-third of a person’s average wages is required for homeownership expenses. The percentage of average wages consumed by those expenses has risen at the fastest quarterly and annual pace since 2000.

ATTOM analyzed 575 counties nationwide, and 97% showed a home affordability lower than the historic average index of 100. ATTOM also analyzed 14 parishes in Louisiana, and all of them scored under the historic affordability index. Orleans Parish was the lowest at 62. Calcasieu was the highest at 93. Jefferson Parish scored an 81, while St. Tammany had a 72, the same as the current national affordability index.

Purchasing a home in St. Tammany, with all the expenses, requires 32.9% of the buyer’s annual income, the highest of any Louisiana parish. The average sales price in St. Tammany is $358,588, up 12% from last year (NOMAR May 2022). The median household income is $70,730 (U.S. Census).

“If you can spend about 20-25% of your income on mortgage, that’s generally where you need to be, so these current high expense numbers are definitely a good chunk of your money and pricing some people out of the market,” said Wayne Turner, realtor and broker/owner of Turner Real Estate Group. “Rates were raised so fast, and inflation happened so quickly that it’s a pinch on people and their buying decisions, especially first-time homebuyers.”

Turner said anything under $300,000 in St. Tammany is selling within three weeks; homes priced between $300,000 to $700,000 last about a month.

But when prices begin creeping toward $1 million, transactions may take longer, as much as three months. Low inventory factors into those stats. In 2019 before COVID, there were 1,850 homes available on the market in St. Tammany. Currently, there are 691, a 63% decrease.

“Our low supply has helped push up our prices,” Turner said. “One thing I’m hearing more of is, ‘If I sell, where I am going to go?’ But as in any market, you have to have a plan. You can’t wait for the market to come you, and you have to work with your realtor to adjust to the current climate.”