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Home Runs 

Low interest rates and a mood of optimism are encouraging people to become first-time homeowners.

Armed with a new mayor and a new attitude, people across the New Orleans metropolitan area are testing out the fresh air of optimism. And nowhere is this positive outlook more apparent, and more transforming, than in the local real estate market.

Aided by what area Realtors consider the biggest motivator -- the lowest interest rates in decades -- many neighborhoods in the city are being revitalized with renovations to older, run-down properties that preserve what many regard as one of the city's most valuable assets -- a historic and architecturally unique housing stock. Compounded with glowing forecasts for continued low interest rates and sustained growth of New Orleans' economy, the twin hammers of renovation and construction should keep pounding.

A survey of area Realtors reveals a consensus as to what's the biggest trend in the local market -- the regentrification of old New Orleans neighborhoods. And calculating all these factors, it's no surprise that realtors also reach another consensus: buy, don't rent.

"I'm really excited about people moving back into the city," says Michael Toso, a residential real estate appraiser and home renovator with his own firm, Michael Toso & Associates.

"In the early '90s, crime across the city was really high, and it had people fleeing the city. But around '97 and '98, (former Police Superintendent) Richard Pennington managed to get a hold on crime, and people began moving back. Now the hot areas are spread all across the city, with all of Uptown, Mid-City, Irish Channel, Carrollton, Bywater and Algiers Point all having dramatic improvements in the last few years. It's very encouraging to drive around the Irish Channel and see all the construction dumpsters out and people working on homes."

Toso adds that the renovation boom is a reflection of the style sought by the younger generation, coupled with the city's recent economic gains.

"The city continues to do well," he says. "And with this new mayor (Ray Nagin), one that is focused on economic development, I honestly don't see it slowing down.

"It's more than just economics, too. People now appreciate the older homes, the ambience and amenities only the city has to offer; they like the restaurants, and they want to be close to downtown and the French Quarter. The interstate and the Causeway have become more and more congested; people are tired of spending their lives in the car.

"And with all this renovation, people are correcting the architectural mistakes made in the '60s and '70s. They're pulling up carpeting, exposing the wood floors, removing the dropped ceilings and basically bringing back these houses' natural charm."

"The whole city is hitting on all cylinders right now," agrees Joe Ory, an agent with RE/MAX n.o. properties. "We're seeing a real belle epoque in New Orleans right now.

"The market is still very hot, especially in Uptown and Mid-City, even though it's been booming there for a while now. We're getting multiple offers on grand, expensive homes, and that lets us know we can expect the market to continue to grow. And if you connect all this with our new mayor, it really opens up an optimistic view of the city."

Ory says that low interest rates are the principal spark for the growth. "The current conditions are rare in that the buying and selling, because of the attractive interest rates, are benefiting both sides of the fence, the buyer and the seller. The rates are helping the first-time homebuyers to purchase their home, which in turn helps the moving-up buyer sell his home for a larger home, consequently helping the trophy buyers buy the expensive mansions. This all combines to create a real healthy market, really in just about every part of the city."

And while real estate is intrinsically cyclical, marked by periods of boom or bust, Ory sees the resurgence of New Orleans as more than just a short-term trend.

"People are moving back in from the suburbs. Crime has been abated a bit, people feel safer in the city now. But the interest rates are what's driving all this. The average life of a mortgage is estimated at seven years. So much can interrupt the 30-year note -- refinancing, moving, death, divorce, anything -- and banks base the rates on a seven-year cycle. With the rates this good, people are going to hold onto these houses."

Along with myriad other economic indicators that don't paint a pretty picture of New Orleans, the relatively low percentage of local homeowners further illustrates the effects of a community wrestling with widespread poverty. Beyond the economic stability that owning a home provides, community activists also point to the relationship between homeownership and the quality of life in neighborhoods. Studies and common sense both prove people securely invested in an area are less likely to produce -- or tolerate -- problems that often spell the death of a neighborhood: the drug trade, violent crime and transients in abandoned properties.

And to reverse this trend -- New Orleans has a homeownership rate of around 40 percent, far less than the national average of 60 percent -- the federal government and several private interests are targeting New Orleans with programs to raise the level of homeownership.

"Recently there's been an effort to publicize how easy it has become to own a home," says Bobby Le Duff, manager of the eastern New Orleans branch of Prudential Gardner. "Most people think there's no way possible for them to own a home. But there now exists several options and programs that help people buy their first home."

Le Duff says that much of the effort is extended by the federal government, which has sought to increase homeownership opportunities in New Orleans with a program known as "second soft money." Le Duff says that with this program, potential home buyers meeting a certain financial criteria are eligible to have second soft money finance 14 and possibly 28 percent of the home's cost, translating into either $14,000 or $28,000 on a $100,000 home.

Another popular option available to people meeting the financial criteria is mortgages financed through bond issues, such as those offered by The Finance Authority of New Orleans, or partnerships created through area banks and the Fannie Mae Foundation, which assists low-income families in purchasing homes nationwide.

"What all these programs mean," Le Duff says, "is that there's a lot of money being pumped into New Orleans to help people buy homes. Some offer interest rates as low as 4.875 percent. That's unheard of! And often, the most difficult roadblock to buying a home, the down payment, is offset by these programs, with people sometimes only needing to pay $1,500 up front."

Combined, all these factors -- low interest rates, optimism concerning the future of New Orleans and a safer city, and programs to achieve home ownership -- provide an impetus to buy a home versus renting a property, Realtors say.

"I tell tenants that they're already buying a house, they're just buying it for someone else," Ory says. "New Orleans has traditionally been a renters' town, but the truth is that your monthly payment is less as a homeowner, and you get a lot more bang for your buck.

"Young people are much more financially savvy these days and know the value of owning a home. They put some 'sweat equity' into their house -- small projects that greatly enhance the property's worth -- and they build wealth automatically. And another benefit of these purchases is that it often renovates these amazing, irreplaceable homes, insuring that these century-old houses will make it another century. It's wonderful to see the saving of our city's history."

"There are advantages to renting in some situations," Toso advises, "namely if you're uncertain of where you're going to be in a year or two. But I always encourage people to buy for a number of reasons, mainly tax write-offs, building up equity and that the market is just so strong. And even in areas where the boom has leveled off a bit, such as Old Metairie, the appreciation growth still makes it a great, great investment."

Despite all the advice and advantages, Realtors still say the decision is a personal one. "It's always good to own a home," Le Duff says. "But a person has to have that homeownership dream. There are some people that don't want to own; they don't want that responsibility. But with owning a home, you're helping yourself. You're building up equity as an asset.

"That, and you own the pride of just owning a home."

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