[StBernard] Home price inflation subsides

[Westley Annis]

Home price inflation subsides
by Ariella Cohen 

Posted: Monday, February 18, 2008 

Real estate experts say housing prices peaked in 2006 post-Katrina, and New
Orleans-area homebuyers will see more bargains on the market this year.

Prices for single-family homes slid in New Orleans last year while prices in
outlying suburban parishes crept up more slowly than in previous years,
according to the Greater New Orleans Metropolitan Association of Realtors.

While reflective of the nationwide housing market slump, the downward shift
signals the spike in values caused by Hurricane Katrina is over and the
region is ripe for the lower-priced homes traditionally forming the backbone
of New Orleans housing market, experts say.

"Prices are now leveling from the inflation that happened right after the
storm and that is a good thing for many buyers," said Frank Trapani, former
NOMAR president. "The demand here has always been for affordable,
entry-level homes and now (such homes) are difficult to find." 

After the 2005 storm season, the average home price in nine New Orleans-area
parishes - Orleans, Jefferson, St. Bernard, Plaquemines, St. Charles, St.
James, St. John, St. Tammany and Tangipahoa - rose 22 percent from $178,471
in 2004 to $217,473 to 2006 as displaced New Orleanians relocated and drove
up demand. 

Price upticks between December 2004 and December 2006 ranged by parish from
a 13 percent rise from $204,024 to $229,664 on the East Bank of Orleans
Parish to a 20 percent jump from $151,166 to $180,768 in eastern St.
Tammany. One year after the storm, almost any structure suitable for living
was ripe for price inflation. 

After two years of rebuilding by residents and a tide of investors swept in
after the storm, sellers have started to respond to the supply-heavy buyer's
market with lower prices. 

The average price of a single-family home on the East Bank of Orleans Parish
slid 19 percent between 2006 and 2007, dropping from $229,664 to $185,490. 

On the West Bank, the average price dropped 0.2 percent from $213,343 to
$213,884. 

Jefferson and St Tammany price changes ranged from a 0.2 percent increase in
eastern Jefferson to 0.73 percent in eastern St. Tammany. The slowing market
coincides with national tumult in the market, yet experts New Orleans is in
a correction, not a crisis. 

The market is adjusting to an abundant supply of new and renovated homes,
soaring insurance costs and a scarcity of high-paying jobs, said Ivan
Miestchovich Jr., director of the University of New Orleans Real Estate
Market Data and Center for Economic Development.

"The Katrina effect is over," he said. "And now what we have is a market
with fewer people (looking for houses in the) higher price range and a huge
run-up in inventory, which means a softening of the market." 

The slowing pace of sales illustrates the demand decline. The average
Orleans Parish East Bank house sat on the market 90 days before selling in
2007, up 58 percent from 57 days in 2004. The nine-parish time sale took an
average of 81 days in 2007, up 35 percent from 60 days in 2004, a faster
home-selling rate experts attribute to lower home prices in suburbs. 

"In Uptown New Orleans, people don't seem to be having a hard time selling
luxury homes," Trapani said. "But if you look across the city and region,
people are looking for entry-level, affordable homes and there is a very
different image for luxury housing." 

Closing prices in parishes surrounding New Orleans remained higher last year
than in 2004. The average home in the nine-parish area cost $208,511 in
2007, or 17 percent higher than the average of $178,471 in 2004. 

Areas hit hardest by Katrina - New Orleans and St. Bernard Parish - now have
average home prices lower than in 2004. On Orleans Parish's East Bank, the
average price was $185,490 in 2007, down 9 percent from $204,024 in 2004. In
St. Bernard, the average price dropped from $103,192 in 2004 to $76,913 in
2007. 

The quickest way to sell a house in the new market is to lower prices,
Miestchovich said. 

"The need that is not being met for work force housing, housing that is
priced under $150,000 for people that are making an hourly wage," he said. 

Developers Matt Schwartz and Chris Papamichael of The Domain Cos. have
seized on the unmet need. In addition to several mixed-income apartment
projects creating 483 units with rents starting at $550 along Tulane Avenue,
Domain plans up to 25 new or renovated homes in the next two years. 

The company plans to put the first five houses up for sale this month. All
five renovated New Orleans-style homes will be priced at about $200,000,
which Schwartz, a New York native who moved to New Orleans to attend Tulane,
said is within reach for working-class buyers.

"There was an artificial spike in sales after Katrina," Schwartz said. "Now
the sector that remains strong and will remain strong is the work force
sector, the sector we are serving of people who are taking the jobs that
will be created as the city recovers.".