[StBernard] Home sales tell tale of two markets

[Westley Annis]

Home sales tell tale of two markets
Prices surge, but only for homes with no sign of storm damage 
Sunday, January 07, 2007
By Greg Thomas
Real estate writer 

Local homes in move-in condition, including those left unscathed by
Hurricane Katrina as well as those that are fully repaired, sold for premium
prices in 2006, fetching sums that were on average 19 percent higher than
before the storm. 

The figures, compiled by Wade Ragas of Real Property Associates and released
this week by the New Orleans Metropolitan Association of Realtors, are the
first to quantify Katrina's effect on home prices. 

Prices of properties damaged in the August 2005 hurricane and still awaiting
repairs plunged by 42 percent from pre-Katrina levels. 

The analysis illustrates the strong appeal of homes that are in good
condition and ready for immediate occupancy. With an estimated 124,000
housing units throughout the area "significantly damaged" by the hurricane
and subsequent flooding, demand for housing remains high even though the
local population has declined, Ragas said. 

Of 16,344 homes sold by real estate agents from October 2005, a month after
Katrina, through all but the past two weeks of December 2006, more than 85
percent were undamaged at the time of the sale. Those undamaged homes sold
for an average of $227,894. 

The majority of the damaged homes sold since the storm had at least been
gutted. Damaged homes sold for an average price of $118,259. 

Despite the area's reduced population, the number of houses sold represents
a 6 percent increase over the last comparable interval before the storm,
according to Missy Whittington, executive director of the New Orleans
Metropolitan Association of Realtors. October 2003 through December 2004 was
a time of extremely brisk activity that preceded the bursting of the
national real estate bubble, Whittington noted. 

The biggest price gains for undamaged homes came in Orleans Parish, where
sales prices have increased 25 percent since Katrina. Prices fell the lowest
in St. Bernard Parish, where virtually every home was substantially damaged.
Sales prices on damaged St. Bernard houses have fallen 65 percent since the
storm, the figures show. 

The run-up in prices of undamaged properties -- and the simultaneous plunge
in the price of property still scarred by Katrina -- is a significant
shakeup for the local real estate market. In the years leading up to
Katrina, the local housing market plodded forward, recording annual sales
price increases of anywhere from 4 percent to 11 percent. 

Experts such as Ragas and broker Dee Lucsy, owner of TLC Realty, which was
based in Chalmette before the storm, said the price swings recorded in 2006
are an anomaly that likely won't be repeated. That's because much of the
appreciation and depreciation came primarily in the first part of 2006, when
buyers in desperate need of housing paidinflated prices. 

Many expect prices to begin to stabilize in 2007, when the Road Home program
begins handing out grants and property owners begin to make long-term
decisions. 

"The (slow pace of the Road Home) is single-handedly freezing more people
out of the marketplace than anything we could imagine," said Arthur
Sterbcow, president of Latter & Blum Realtors Inc. 


Long-term impact 


Katrina will likely impact the local real estate market for years to come. 

Ragas estimates that as many as 100,000 local homes have yet to be repaired
-- or even gutted and cleaned up -- since the storm. 

Prices are expected to stabilize as more homes undergo repair and as new
apartment complexes, taking advantage of low-income tax credits, are
completed. 

Indeed, at the end of 2006, the extreme price differentials already were
beginning to soften. 

For example, while the price of undamaged homes in Orleans Parish climbed by
25 percent between Katrina and the end of 2006, all of the appreciation had
occurred by June 2006, Ragas' data shows. Undamaged Orleans Parish homes
experienced another 14 percent decline in value between June and December of
2006. 

Still, the process of completely repairing the local inventory of homes
could take years, Ragas said. There have been 80,000 construction permits
issued in New Orleans since the storm, but it will take a long time for all
of that work to be completed. 

Much of the repair work is being pursued by individual homeowners, not the
national investors some had feared. 

"At first, that was the big concern," Lucsy said. "Investors were going to
go in and take over, but I haven't seen investors come in and take over full
blocks like people feared in the beginning." 

But the lack of national investors also means rebuilding and recovery will
unfold in piecemeal fashion, one house at a time. 


Split personality 


And in the process, two distinct housing markets are evolving, Ragas said. 

One market revolves around buyers willing to pay extra for homes that can be
occupied immediately. The other caters to buyers of lower-priced damaged
homes who are willing to "accept the challenge of rebuilding with the hope
of achieving windfall profits" when they resell, Ragas wrote in his report. 

Several specialists predicted that the market will pick up this spring. One
reason, according to Sterbcow, is that those who were displaced by the storm
and are currently leasing apartments will begin to see their leases expire
and may try to buy repaired homes. 

A second reason, according to Lucsy, is that when Road Home money begins
flowing, more homes will be repaired and put on the market. That,
eventually, should stabilize prices and lower the gap between damaged and
undamaged properties. 

Meanwhile, Frank Trapani of Latter & Blum says that the lack of affordable
housing is still slowing the return of the area's service economy workers. 

Many of them can only afford the lower rents available in the suburbs, said
Trapani, who is the 2007 president of the New Orleans Metropolitan
Association of Realtors. Inadequacies in the region's public transportation
system make it hard for these workers to commute to work, much of it in the
city, Trapani added. 

Another impediment to the recovery and home sales is that people "are still
not extremely confident that (buying a home) is the right thing to do.
Insurance? Levees? Still, the report shows an optimistic view of what the
city has to look forward to," Trapani said. 


St. Bernard market drags 


St. Bernard is the only parish to have all of its properties classified as
damaged in Ragas' report. Still, Ragas said that as many as 600 homes have
sold since the storm, most by the owner without a real estate agent. 

The average price in the parish was $27 per square foot, down 65 percent
from $77 per square foot before Katrina. As in other parishes, the bulk of
the depreciation occurred during the first part of 2006. Sales prices fell
by only 10 percent between June and December of last year. 

Lucsy, who lived in St. Bernard before the storm, said she's seen many
parish residents and businesses make permanent post-Katrina moves to St.
Tammany. 

"And the former St. Bernard businesses seem to be doing well" there, she
said. Lucsy, in fact, is operating from Covington now. 

She says the preponderance of damaged properties in the parish is driving
down prices -- and the lack of new buyers is another drag on the market. 

What the market doesn't reflect are the number of St. Bernard residents who
are fixing up their homes with the intention of reoccupying them. "The
people moving back are coming back to move in and stay. It's hard to say
what the houses would sell for" with a lack comparable sales, Lucsy said. 

Most of the St. Bernard homes that have been sold since Katrina were sold by
owners not using real estate agents, Ragas said. 


Across the region 


Real estate activity in other parishes is as follows: 

-- In Orleans Parish, the average price of an undamaged home was $149 per
square foot, up 25 percent from $119 per square foot before the storm. The
average price of a damaged home in Orleans was $52 per square foot, down 56
percent from $119 per square foot before the storm. A total of 2,521 damaged
and undamaged homes have been sold in Orleans since the storm, an increase
over 2004's sales of 2,069, the last full year of transactions not skewed by
Katrina. 

-- East Jefferson, also affected by Katrina, recorded an average sales price
on undamaged homes of $136 per square foot, up 14 percent from $119 per
square foot before the storm. The average price of damaged homes in East
Jefferson was $83 per square foot, down more than 30 percent from $119 per
square foot before the storm. A total of 2,701 damaged and undamaged homes
have been sold in East Jefferson since the storm, compared with 1,633 in
2004. 

-- West Jefferson recorded an average sales price on undamaged homes of $94
per square foot, up 13 percent from $83 per square foot before the storm.
The average price of damaged homes in West Jefferson was $56 per square
foot, down 32 percent from $83 per square foot before the storm. A total of
1,537 damaged and undamaged homes have been sold in West Jefferson since the
storm. The number of units sold climbed slowly, from 1,410 in 2004 to 1,422
post-Katrina, even with four extra months of sales. 

-- Eastern St. Tammany recorded an average sales price on undamaged homes of
$106 per square foot, up 6 percent from $100 per square foot before the
storm. The average price of damaged homes in eastern St. Tammany was $43 per
square foot, down more than 57 percent from $100 per square foot. A total of
3,468 damaged and undamaged homes have been sold in eastern St. Tammany
since the storm, while in 2004 unit sales were 2,887. 

-- Western St. Tammany recorded an average price on undamaged homes of $124
per square foot, up 17 percent from $106 per square foot before the storm.
The average price of damaged homes in western St. Tammany was $55 per square
foot, down 56 percent from $124 per square foot. A total of 2,945 damaged
and undamaged homes have been sold in western St. Tammany since the storm,
compared with 1,088 in 2004. 

-- In the small Plaquemines Parish market, there was no distinction made
between damaged and undamaged homes in the data. The study looked at sales
in the Belle Chasse area only, ignoring the devastated areas of lower
Plaquemines. The average sales price on homes in Belle Chasse since the
storm was $123 per square foot, up 10 percent from $112 per square foot
before the storm. A total of 123 Belle Chasse homes have sold since the
storm, compared with 83 in 2004. 

-- Figures for St. Charles and St. John the Baptist parishes, which suffered
considerably less Katrina damage, also did not distinguish between damaged
and undamaged properties. In St. Charles, the average sales price since the
storm was $109 per square foot, up 18 percent from $92 per square foot
before the storm. More than 1,080 St. Charles homes have been sold since the
storm. In St. John, the average sales price since the storm was $99 per
square foot, up 24 percent from $80 per square foot before the storm. More
than 1,600 St. John homes have been sold since the storm, compared with 463
in 2004. 

-- And in Tangipahoa Parish, where homes also did not sustain significant
damage, the average sales price since the storm was $96 per square foot, up
21 percent from $79 per square foot before the storm. There have been 947
sales there since Katrina, compared to 678 in 2004. 

. . . . . . . 

Greg Thomas can be reached at gthomas at timespicayune.com or (504) 826-3399