[StBernard] New Orleans home prices up in the city, down in the suburbs

[Westley Annis]

New Orleans home prices up in the city, down in the suburbs
by Kate Moran, The Times-Picayune 
Saturday January 31, 2009, 7:42 PM

SCOTT THRELKELD / THE TIMES-PICAYUNE
Resolute New Orleanians have stuck by their city in the face of poor
schools, high crime and fearsome hurricanes, mortared here by the unique,
soulful culture exemplified in its Carnival celebrations. That singular
attachment to place appears to have buttressed the city's housing market
during a time of widespread weakness. 


MICHAEL DEMOCKER / The Times-Picayune
Signs indicate homes for sale on Nashville at South Johnson in uptown New
Orleans Thursday, January 29, 2009.After holding aloft during the early
months of the recession, home prices across the New Orleans area began a
retreat in 2008 that will likely continue this year. The exception was the
city itself, where single-family homes gained an average of 4.4 percent in
value. All of the suburban parishes, meanwhile, registered modest, if not
catastrophic, price declines. 

Wade Ragas, a consultant and former professor who prepared the survey of
price trends for the New Orleans Metropolitan Association of Realtors,
thinks the tide of insurance and rebuilding grants that flowed into the city
after Hurricane Katrina helped insulate it from falling home prices. The
longer a parish has been recovered, he ventured, the more it resembles
wilting markets in other parts of the country. 

. House prices by square-foot and zip code

Yet Ragas sees another factor in play. New Orleans and its institutions have
always inspired fierce loyalty from residents who in many cases can trace
their roots back generations. He points out that the question of where a
person attended high school, often exchanged when city residents first meet,
evokes a host of familial and social connotations that might not translate
in new-growth suburbs on the north shore. 

"If you have great loyalty to a brand, you will put up with its little
anomalies," Ragas said. "For residents who have chosen to move back to New
Orleans, it is important to their view of themselves." 

Ups, downs in Tammany 

Ragas said St. Tammany Parish attracts executive types who want safe streets
and good schools, but do not necessarily have an ancestral allegiance to the
place. The metro area lost more than 85,000 jobs from the first quarter of
2005 to the same period in 2008, and Ragas said the north shore would have
been particularly vulnerable to corporate relocations and consolidation in
the oil and gas industry. 

Still, total employment in St. Tammany Parish climbed by more than 7,000
jobs during that period. 

Perhaps more than corporate relocations, the huge number of new homes that
flew up in Tammany after the storm has contributed to the ebbing of home
prices. Nearly 6,000 homes sold in the parish in the year after the storm,
and builders responded with a crush of new construction. As single-family
home sales dropped below 2,200 this past year, much of that inventory idled
on the market. 

"Some people who moved to the north shore after Katrina fixed their houses
on the south shore and moved back. Some industries consolidated and moved
people to other towns. The combination of corporate relocations and a little
bit of overbuilding" has helped dampen prices, said Glenn Gardner, president
of Prudential Gardner Realtors. 

The slight drop in home prices should not trouble residents who have owned
property on the north shore for a while, as they continue to enjoy the
stunning equity gains they amassed after Katrina. Although prices fell 5
percent in Covington this past year, they remain 23 percent higher on
average than they did before the storm. 

It's more problematic for residents who bought during the 2006 bubble and
now want to sell their home and return to the south shore. If they purchased
a home with only a small down payment and values continue to tumble, they
could be stuck with a mortgage worth more than the house itself: a microcosm
of the bust that has afflicted states like Florida and California. 

"St. Tammany has the preconditions that breed foreclosure activity," Ragas
said. 

Loyalty to St. Bernard 

Councilman George Cavignac of St. Bernard Parish said he has heard from
constituents who want to return but feel trapped on the north shore because
of their negative equity. Home prices waned by less than 2 percent last year
in St. Bernard, which nonetheless held up better than St. Tammany, with its
6 percent decline, and Jefferson, with its 3 percent decline. Chalmette,
where the largest number of sales took place, actually posted a 2 percent
gain. 

If Ragas' theory holds true, St. Bernard outshone other suburban parishes
because it elicits the same sort of brand loyalty that New Orleans does.
Cavignac said prices have also held steady because they were artificially
low before the storm. Residents of the tight-knit parish historically bought
real estate from relatives who gave a discounted price, but the high cost of
construction after Katrina has pushed values to a more market-driven
standard, he said. 

Although New Orleans was alone in posting overall gains last year, home
prices showed more motley results when examined at the neighborhood level.
Historic areas such as Uptown and the Garden District boasted strong
appreciation, with the average home price in the tony 70118 postal code
topping $500,000. 

Prices also climbed in recovering Lakeview, while dropping 11 percent in
slower-to-rebound Gentilly. Eastern New Orleans registered some of the most
formidable price gains, largely because middle-income buyers can get more
square footage for their dollar there than they can in the city's historic
center, real estate agents said. 

"It's also a very prideful community, much like St. Bernard," said Arthur
Sterbcow, president of Latter & Blum. 

Encouraging signs 

While several real-estate agents said 2008 was their dimmest year in recent
memory, they pointed to some hopeful signs. 

Although the volume of home sales plunged from 11,334 in 2007 to 8,126 in
2008 -- a decline of almost 30 percent -- prices fell by only 1.3 percent in
the metro area as a whole. The region has also been spared the rampant
foreclosures that continue to depress home prices in states like California,
Florida and Nevada. 

The nation's housing woes have nonetheless alighted on the New Orleans area
in the form of more stringent lending standards. Sterbcow and others said
the increased cost and difficulty of borrowing money has pushed some
first-time buyers to the sidelines, gumming up the market for existing
owners who want to sell their starter home and trade up to more affluent
subdivisions in St. Tammany, for example. 

After holding steady for the first half of 2008, prices dipped in Jefferson
Parish in all but one postal code by the close of the year. Although the
decline is partly tied to the lack of first-time homebuyers, Lynda Nugent
Smith of Keller Williams said updated houses in Jefferson and other parishes
continue to sell. Buyers, perhaps impatient with the idea of home repairs
after Katrina, are turning away from fixer-uppers. 

"There is nothing new about Jefferson Parish anymore," said Smith, the risk
management broker at the company's East Jefferson office. "Most of the
inventory I see sitting on the market has the 8-foot ceilings, paneling and
shag carpet. That's not what people want today." 

Although 2008 proved a difficult year for real-estate agents, Margie Inman,
broker-owner of Coldwell Banker TEC, said she has started to see a thaw in
recent weeks, perhaps because of falling interest rates and a renewed sense
of confidence spawned by the transition in the White House. Sterbcow, of
Latter & Blum, said traffic on his company's Web site has been strong. 

If interest rates for borrowers with decent credit continue to hover around
4 percent in the coming year, Ragas said opportunities will abound for savvy
homebuyers. 

"There could be unbelievable buying opportunities with falling prices and
low rates," Ragas said. "It could be an incredible lift for the housing
market." 

Kate Moran can be reached at kmoran at timespicayune.com or 504.826.3491.