“New Orleans is behaving like it’s a Chicago or a Boston, as a wonderful urban center. People want to live in the urban market.” Wade ragas, real estate consultant
When, after a half-hour, no one had showed up Sunday for an open house for a nearly 4,000-square-foot State Street fixer-upper with an $899,000 price tag, listing agent Ann De Montluzin Farmer was hardly worried.
It would sell, she figured — and fast, if other recent sales in the Uptown neighborhood were any indication.
In October, a home on Valence Street went under contract less than 24 hours after she listed it for sale. The transaction set a record sales price, $295 per square foot, for the neighborhood, De Montluzin Farmer said.
That was followed by the swift sale of a house on Laurel Street to an out-of-town couple in search of a second vacation home.
“It will sell,” the agent said of the State Street property. “People are moving in. Uptown is faster than it normally is.”
Quick sales and rising home prices are not happening only in Uptown, however.
Home prices rose across the metro area in 2013, as demand continued to grow in most of Orleans Parish and also began to pick up in the suburbs and east of the Industrial Canal, where it had been weak.
The average cost of a single-family home in the metro area rose 4 percent, to $110 per square foot, in 2013, according to an analysis by real estate consultant Wade Ragas based on data from the New Orleans Metropolitan Association of Realtors.
That price is a record high, Ragas said. Homes in the metro area sold for about $102 per square foot before Hurricane Katrina in 2005.
“It’s a good housing market,” Ragas said. “We are beginning to see extraordinary things, like houses go on the market in parts of Uptown for a day or two and get multiple offers. That’s unusual.”
His analysis is intended as a market snapshot, not as an estimate of the value or likely sale price of homes, Ragas said. The data do not include sales of multifamily homes, townhouses, condominiums and vacant lots.
Prices were highest in Orleans Parish, where homes in acceptable or better condition fetched $153 per square foot on average in 2013. That’s $11 per square foot or 8 percent more than they sold for in 2012.
Considered another way, a 2,000-square-foot home would have sold for an average of $306,000 last year, $284,000 in 2012 and $228,000 in 2005 before Katrina.
“New Orleans is behaving like it’s a Chicago or a Boston, as a wonderful urban center,” Ragas said. “People want to live in the urban market.”
Homes also sold faster last year, said Chip Gardner, vice president of operations for Gardner Realtors. Homes that sold in December 2012 had spent an average of 96 days on the market, he said, based on a report his company generated. Those that sold in December 2013 had been on the market for 72 days.
Several neighborhoods recorded double-digit percentage increases in single-family home prices last year, including Central City, up 23 percent; the Lower Garden District, up 15 percent; and Gentilly, up 13 percent.
Some New Orleans East neighborhoods that had seen falling prices rose spectacularly in the past year. In the 70126 ZIP code, which includes parts of New Orleans East and Gentilly, home prices climbed 7 percent. In the area bounded by Chef Menteur Highway, Paris Road, Hayne Boulevard and Wright Road, prices were up 13 percent in 2013. Further east in the 70129 ZIP code, homes were a whopping 31 percent more expensive. Home prices had fallen 9 percent in all three areas in 2012.
“That area hadn’t really participated in the rising prices,” Ragas said. “It had been a real struggle.”
The comparative affordability of homes in New Orleans East is attracting buyers who find themselves priced out of other neighborhoods, Gardner said.
The average home price in the most expensive eastern New Orleans ZIP code was $80 per square foot, according to Ragas’ analysis.
“It’s kind of hard to define what’s not getting action on the east bank of Orleans,” Ragas said.
It is true, however, that not all areas are riding a wave of higher prices. Prices fell 1 percent in the 70127 ZIP code in New Orleans East and in a handful of areas in Jefferson and St. Tammany parishes. The average price of structures that haven’t been repaired since Katrina also fell 10.4 percent.
But prices have improved overall.
Two key factors — higher consumer confidence, particularly job security, and speculation that interest rates will rise — are contributing to the rise, Latter & Blum Inc. President Richard Haase said.
Average rates on fixed mortgages rose in 2013. The average rate on a 30-year loan was 4.46 percent in December, up from 3.41 percent in January, according to mortgage buyer Freddie Mac. Rates are still low compared with historic figures. But buyers fearful they will have to pay more later are choosing to buy now.
“When buyers feel like the interest rates are starting to move up, then they act,” Haase said.
Those factors have been causing prices to tick up in Orleans Parish for the past four years, but last year marked the first sign of turnaround for Jefferson and St. Tammany parishes.
“It’s been a bifurcated story,” Ragas said. “Orleans has just been rolling and going up a whole lot year after year. The rest of the market has actually had, in 2010 and 2011 and for many areas in 2012, periods of falling prices.”
Jefferson Parish home prices climbed almost 5 percent in 2013 after holding steady in 2012 and declining in 2011, according to Ragas’ analysis. Homes sold for an average of $102 per square foot in Jefferson last year, compared with $97.50 in 2012. Prices still are short of pre-Katrina levels, when homes sold for an average of $105 per square foot.
At an average sale price of $104 per square foot, homes in St. Tammany are selling just above the pre-Katrina level of $103 per square foot.
Last year also marked a reversal for St. Tammany. Home prices spiked 5 percent north of Lake Pontchartrain, the first year of higher prices since 2009.
Home prices in St. Tammany were down 1 percent in 2012, to $99 per square foot. The 2013 spike can be attributed in large part to a shortage of homes on the market, said Margie Inman, president of Coldwell Banker TEC. The number of homes that came up for sale in St. Tammany in 2013 was the lowest since Coldwell began tracking the figure in 2006, she said.
“We have a record low inventory,” she said. “There’s just not enough product on the market. Normal supply and demand is at work.”
Inman said the 2008 recession reduced the amount of new construction taking place on the north shore, but there hadn’t been much pressure on the housing market for new structures until last year, when the economy gained strength.
Among other parishes in the metro area, home prices were up 2 percent in Tangipahoa, 12 percent in St. John, 8 percent in St. Charles and 11 percent in St. Bernard. Prices remained the same in Plaquemines Parish.
The metro area is shifting from a buyer’s market to a neutral one, Haase said. In a buyer’s market, it would take six months or longer to sell all the properties available for sale at any one time. In a seller’s market, the supply could be extinguished in three months or less. A neutral, or balanced, market is somewhere in between.
The metro area currently has enough inventory to last about 6.9 months, Haase said.
“This is as close as the Greater New Orleans market has been overall to a balanced market in the last four to five years,” he said. “I consider a balanced market (to be) a healthy market, because it affords property owners a reasonable appreciation without creating a bubble or outpricing buyers in the marketplace.”
While he said he was “extremely optimistic” about the local market, Haase said the balance could be threatened by higher flood insurance premiums and a change in underwriting standards for loans that would make it more difficult for people with low credit scores to qualify for home mortgages.