The National Association of Realtors reported that, in 2002, a total of 5.598 million existing homes were sold, a number that's well above 2001's 5.282 million figure. Furthermore, 2003 is expected to reach a new record of 5.73 million. Market observers attribute this growth partially to a stock market that encourages investment in other areas, namely real estate, but chiefly to low mortgage rates. While the current mortgage rates allow for more loans, and thus, more home sales, they also figure into inflating the cost of the average home. This confusing equation leads market experts to ponder: is the real estate bubble finally bursting?
The answers are mixed. While the national average home price is predicted by some to level off after years of rapid increase, the New Orleans market is different. Abundant and affordable historic homes, Warehouse District spaces easily converted to in-demand condos, and political hopes (new mayor, new school superintendent) present a positive forecast.
"Year after year, housing prices just continue to go up quite a bit," says Valerie Patterson, senior producer for RealEstateJournal.com, a part of the Wall Street Journal's online division, under parent company Dow Jones Co. & Inc. "I find it very surprising we haven't seen a little bit of stagnation, when you consider the weak job market and overall economy health."
Describing the strong real estate market as "a bedrock" of an otherwise faltering economy, Patterson says that the "trailing indicators" related to home purchases -- renovations, furniture buying -- are perhaps the best assets a strong real estate market produces. "When people buy a home, they need to fix it up, they need to buy stuff to fit in it," Patterson says. "That keeps things going and is especially helpful on a local level."
Patterson adds that, nationally, it's only in the luxury-home level (generally considered houses with prices above $300,000) "that some areas have slowed quite a bit."
"In (luxury-home) cases, certainly I think buyers are cooling their heels a bit," she says. "Home-sellers in that area have to be more flexible about asking prices or wait a little longer for the sale."
But, conversely, Patterson says that first-time homebuyers and life-long renters are now making the jump to ownership because of low interest rates. "These rates make it so easy to purchase a home," Patterson says. "It opens up home-ownership to a wider audience, which is a good thing. But, there has to be some leveling off of home prices at some point, simply because a lot of people, even with low interest rates, won't be able to afford even a starter house if we keep seeing 10 percent annual increases in prices. The market can't bear that."
Prices, however, show no sign of slowing down in the New Orleans market. Across the region in 2003, average home prices in Orleans Parish recorded a jump of 5.5 percent over 2002, second only to western St. Tammany Parish, which enjoyed an increase of 5.9 percent from last year. The big price push in the Mandeville and Covington areas can be attributed to good schools, secure neighborhoods and a demand for historic homes, with all their quirks and charms, that reflects a national trend.
According to figures posted on RealEstateJournal.com, citing a number of sources, including the New Orleans Regional Chamber of Commerce, the median home-resale price in New Orleans in 2003 is projected at $123,500. This number is just below the median new home price in Louisiana, $123,600, and is slightly below what is termed a "typical corporate-level home" (described as a single-family, four-bedroom, two-and-a-half-bathroom, 2,200-square-foot residence), priced at $136,000 in New Orleans. The corporate-level in New Orleans is disproportionately lower than other Louisiana markets, with the same home description in Baton Rouge figured at $143,000, Lafayette at $158,250, and $182,225 for Shreveport/Bossier City.
This statistical anomaly is perhaps best explained by the market's demand for historic homes. Take for example the average 2003 home price in select city neighborhoods: the French Quarter ($171,224), Garden District ($274,421), and Central Business District/Warehouse District ($251,088).
"Our market in historic areas is just incredible," says Isabel Reynolds, a Realtor with Prudential Gardner. "Uptown, the Marigny, Bywater, Irish Channel -- they've all seen an incredible amount of gentrification, and it shows no signs of slowing."
While many indicators regarding New Orleans' economy are disturbing at best, Reynolds finds plenty of positive impact resulting from the gentrification trend. "It's amazing how these prices keep going up and up," Reynolds says, who adds that, while real estate typically operates in seven-year cycles, New Orleans is now in the midst of an 11-year boom with no period of downturn. "The city is losing population, but there are reasons for that. Doubles are turned into singles; multi-family units are converted into doubles because people want to invest in these beautiful homes. And the city enjoys more tax money from this."
While the seemingly insatiable demand for historic homes is the biggest trend in local real estate, Reynolds says, there are several other factors at work. "Good schools are always going to be important to parents," she says, adding that the district schools offered to a given neighborhood are a huge plus, with areas of the West Bank, Uptown and Lakeview having the biggest advantages in that concern. Another trend from which New Orleans is currently benefiting is the increased popularity of condominiums.
"Condos are definitely coming up as a huge part of our market," Reynolds says, noting a recent deal where 21 condo units in a converted building at Carondelet and St. Joseph streets sold out during pre-construction. "There are two forces at work in the warehouse boom. In the Warehouse District, you have young people in their first job, looking for affordable housing, and they don't want to mow the grass. But they do want 14-foot ceilings and nightlife.
"You also have older couples with empty nests who no longer need 4,000-square-foot homes," Reynolds continues. "They like to travel and maybe have second houses in Pass Christian or the Northshore. The condos provide security and amenities such as easy, safe parking and pools and exercise rooms. This is a trend that will continue to grow as (baby boomers) age."
However, a new attitude in New Orleans also benefits the local real estate market. "Right now, we're selling to each other," she says. "When is the last time a new industry came to the city? But, there's lots to look forward to. (Port of New Orleans Executive Director) Gary LaGrange is very energetic and enthusiastic and is working hard to bring more trade and jobs here. A lot of people have faith in Mayor Nagin and (new Orleans Parish School Superintendent) Anthony Amato -- he's a breath of fresh air.
"If Amato's allowed to do his job, the schools will improve. And if our schools improve, we'll have a boom you wouldn't even believe. I'm very optimistic."
RE/MAX New Orleans Properties Realtor Colette Meister shares Reynolds' enthusiasm, particularly in regard to condo units and historic neighborhoods.
"Condos are hot right now, the reason being people can move out of a rental and into a condo because they're affordable," Meister says. Meister should know, having recently completed the sale of all eight units of a new construction condo building in the 1100 block of Orange Street in the Warehouse District, selling all units -- priced between $118,000 and $189,000 -- within three weeks. "But you also have new, large, luxury condo units, especially along the Lakefront, that are also doing very well."
"Warehouses are trendy right now; you're seeing them all over the area," Meister says. "They're the best of old and new, with historic properties, with high ceilings and wooden floors combining with modern things like granite countertops and Jacuzzi tubs. It's not your typical boxy, square, low-ceiling space that's typically considered a condo."
Meister also attributes interest in the historic areas of town as helping the local market. Saying that Uptown's prices are holding steady after years of boom and the French Quarter's -- already not affordable to most buyers at $300 per square foot -- not in a growth period, the momentum has moved to other areas. "The biggest change recently has been in the Bywater and Marigny; they're seeing homes double in value," Meister, a Faubourg St. John resident, says. "Treme is hot, and so is the Irish Channel.
"Prices are still going up," she adds, "but we're still in the process of catching up with the rest of the nation in terms of home values."