For the past six months, Dennis Zaffuto has been trying to buy a shotgun double or a duplex in Mid City with no luck.
It’s hard enough finding a desirable house in his price range of $400,000 to $450,000, he said. The few times he has, he’s been outbid.
“There is not a lot of property on the market that is viable and when they do come up, they sell within a matter of days,” said Zaffuto, who is currently renting. “I even offered all cash, full asking price recently and it got bought out from under me.”
In high-demand neighborhoods like Mid-City where Zaffuto is looking, real-estate agents say that the quick sales and high bids that have defined New Orleans real estate in recent years remain in place. The same thing can be said of even pricier homes in the luxury market.
But real estate experts are casting a wary eye at several factors — and a few pieces of recent data — that suggest changes ahead.
Rates are averaging about 6.3% for a 30-year mortgage compared to less than 3% in 2021, which can make monthly payments that were affordable a year ago less so now. Also, U.S. inflation has climbed above 8%, compared to slightly more than 5% a year ago, keeping a floor on prices and further reducing buying power.
Meanwhile, the number of home sales in the nine-parish New Orleans metro area is down 10% this year compared to same period a year ago, according to the Gulf South Real Estate Information Network.
And perhaps more telling, the number of homes on the market was up 14% in August compared to last year, increasing the months’ supply of inventory from about 2 months to nearly 3 months.
Taken together, it’s clear the market is no longer a “seller’s market,” according to residential brokers. But as Zaffuto and other buyers are finding, that doesn't mean fire sales.
There is still a lot of demand in some neighborhoods, particularly in Mid-City, Uptown, parts of the Bywater and Old Metairie, brokers say.
“It’s probably the strangest housing market I’ve seen in 20 years,” said Craig Mirambell, a broker who specializes in the Metairie area. “Some houses now are sitting for 30 to 60 days, and others fly off the market overnight with multiple offers. It’s house by house, block by block, and it doesn’t make a lot of sense.”
A 'neutral' market
While it may be hard to make sense of what is going on in one respect, the factors influencing the seemingly contradictory market forces are clear.
In addition to rising mortgage rates and surging inflation, there’s also a growing insurance crisis in the state. Eight insurers have gone under in the past year. As a result, the state’s insurer of last resort is expected to increase rates 63% beginning in January. Additionally, FEMA’s new risk-based rating system for flood insurance is expected to double what half the state’s residents pay for that protection.
To be sure, home prices — the primary marker of how frothy a market is — are still rising. The average sale price in the New Orleans metro area was up 8% this year to $343,257, compared to $317,791 last year, while the median sale price was up 9.4% to $279,000 compared to $255,000. But those increases were mostly on paper once inflation is factored in.
Meanwhile, the months’ supply of inventory has increased 33% to nearly 3 months from 2.1 months last year at this time. A supply of less than three months is generally considered a seller’s market, while a supply of six months or more is a buyer’s market.
“We’re moving toward the middle of those two extremes, which is a neutral market,” said David Favret, a realtor with Latter and Blum, who currently serves as president of the New Orleans Metropolitan Association of Realtors.
Inventory is not evenly spread around though, and affordable housing stock, which brokers say is currently considered anything below $350,000, is limited.
For first-time homebuyers trying to build equity with a home purchase, it’s a real problem.
“We have first-time buyers who have been looking for a year,” Mirambell said. “They wanted Metairie. Now, they’re looking in Slidell or Luling because it’s more affordable.”
The high-end segment of the market is still going strong as well. Luxury homes priced at $1 million or more are hot, according to realtor Chris Dorion of Berkshire Hathaway Preferred Realtors, who says those buyers are less likely to need a mortgage and aren’t as hard hit by insurance rate hikes, even though they feel them.
“The true luxury market is still really strong,” he said. “There is still really this cachet about New Orleans and there are a lot of buyers who can afford it.”
But even in the mid- and high-end segment of the market, brokers say they’re noticing that sellers are becoming more realistic about their asking price.
“Anything that is well priced, realistically priced, goes fast,” said realtor Bron Hebert with the Francher Perrin Group. “Some of the frenzy has died down. But anything well priced will sell.”
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