Numbers of homes for sale have surged since Katrina, with not so many takers -- leaving the potential for both glut and opportunity

Sunday, December 10, 2006

By Greg Thomas

The number of local homes for sale has soared since Hurricane Katrina, with large numbers of homeowners selling either the houses they owned before the storm or ones they purchased after for emergency shelter .

The tally of homes currently on the market reached 10,078 in October, up 54 percent from 6,551 in August of 2005, according to figures gathered from the New Orleans Metropolitan Association of Realtors and analyzed by Prudential Gardner Real Estate Inc. On the east bank of Orleans Parish alone, the number of homes for sale has increased 70 percent since Katrina.

"In my 30 years in real estate, I've never seen an increase in inventory like this in a 15-month period," said Rick Haase, chief executive officer of Prudential Gardner.

In fact, the number of homes currently listed for sale is almost exactly the same as in 1989 when the oil bust -- which sent the housing market into its worst dive in recent history -- was ending. The buildup is occurring as families put homes up for sale at a faster rate than houses are actually selling. In October, 1,062 homes were sold in the metro area, 15 percent more than were sold in August of 2005.

Homes priced at more than $500,000 are languishing on the market for as long as a year, the data show.

"And we're beginning to see a slowdown in the $275,000 to $350,000 range," said Arthur Sterbcow, president of Latter & Blum. Post-Katrina price inflation means more homes than ever fall into those price categories.

Economists say the increasing number of homes on the market -- plus the growing length of time some are taking to sell -- is part of the shakeout after last year's hurricanes.

The buildup in the number of homes for sale is only natural given the large numbers of families that have been displaced, said Wade Ragas, a real estate consultant with Real Property Associates.

Some displaced homeowners have decided to make the alternative housing arrangements they've had for the past 15 months permanent and put their pre-hurricane homes on the market, said Janet Speyrer, director of the Division of Economic Research at the University of New Orleans. Others have been able to move home and are now selling houses they bought in a desperate search for shelter in the first weeks after Katrina.

And though the rebuilding boom is funneling revenue to those working in the skilled trades -- a trend Speyrer has dubbed the "blue-collar boom" -- many families still can't afford to reoccupy their pre-Katrina homes because of soaring insurance premiums and the long wait for Road Home money, she said.

The longer homes linger on the market, the more likely it becomes that prices will decline, opening up new opportunities for potential buyers.

"That's a formula for price compression," said Ivan Miestchovich, a professor and director of the University of New Orleans ' Center for Economic Development and head of its Real Estate Market Data Center. "The market is pretty much at a transition point. We're in that gray area right now with the amount of inventory on the market. . . . My bet is we're going towards a buyers' market more than a sellers' market over the next several months."

'Abnormally high'

The high volume of homes flooding the market likely will continue.

"For the next year or two, the number of houses for sale is likely to stay abnormally high," Ragas said. Because many families are awaiting the results of the Road Home program, they are putting off decisions such as home purchases.

Ragas notes that more affordable homes -- those priced at less than $250,000 -- are selling the fastest. Higher-priced properties are slow to sell for a variety of reasons.

Speyrer said many physicians and medical professionals who could afford a $500,000 home have set up practices elsewhere in the country and are trying to decide whether or not to move back.

"Sometimes it's easier to stay than break up and move a practice" back to New Orleans , she said.

UNO's Miestchovich adds that condo sales in the Warehouse District have been slow because of the loss of many professionals and students from the Medical District.

"There's just too much uncertainty" for new or old businesses with large professional or white-collar work forces to return, Sterbcow said. In addition, insurance premiums -- which are skyrocketing for homes of all values -- are proving especially onerous on higher-end properties, he said.

Joan Beauchamp, an agent in Latter & Blum's Garden District office, has sold several homes for well above $1 million. But she admits there is a dearth of buyers, and one of the reasons is that many Uptown sellers are "being unrealistic in (setting) their prices."

She also said she had a bidding war on a home that sold for $1.55 million. But it's that middle upper tier, $500,000 and above, that is moving slowly. "It's a lot of inventory and it's a buyers' market," Beauchamp said.

"There's a growing disconnect between sellers and buyers," Hasse said. "Sellers want premiums if their home was undamaged, and buyers are waiting out what they believe are overinflated prices in uncertain times."

Trending toward buyers

Still, some real estate experts say buyers will control the market in the long run as prices ease.

Some slowing of prices already is evident. The average sales of homes metrowide dipped 1.9 percent between August 2005 and October 2006, from $201,473 to $197,664.

And the metro area is on track to report solid sales for the year. Through October of this year, there had been 10,434 sales homes sold. In all of 2004, there were 12,472 single-family homes sold, according to the realtors association.

"The time to buy real estate is when no one else is buying real estate," Sterbcow said. "For every person I'm seeing who is moving out of state, (that) means someone moved in and bought" a home, enabling the seller to move. Already, investors and neighbors are snapping up damaged properties to fix and flip, Sterbcow said. The trend is being fueled by the fact that banks, flush with cash now that so many consumers have deposited insurance settlements, are looking for mortgage business.

"They're making renovation loans at (low) rates you wouldn't believe," he said. "We're all optimistic because of a combination of factors."

Indeed, executives at many local real estate companies say that despite the large number of homes sitting on the market, unit sales will break records this year.

Most of the increased inventory of homes is on the east bank of New Orleans , and most of those listings are in eastern New Orleans .

Some examples

Data from the New Orleans Metropolitan Association of Realtors' Gulf South Real Estate Information Network and inventory data from Prudential Gardner show that parishes not hit by Katrina's wrath are seeing strong average appreciation and even stronger unit sales for single-family detached homes, excluding lots, condos and townhomes.

For the 15 months since Katrina, here's a snapshot of inventory and average sales prices:

-- In East Jefferson , the number of listings has climbed 90 percent from 875 listings in August 2005 to 1,660 in October 2006. During the same time period, the average sales price crept up 1.2 percent, from $242,028 to $245,122.

-- West Jefferson saw listings climb from 542 in August 2005 to 705 in October 2006, an increase of 30 percent. In the same period, the average sales price climbed from $164,798 to $168,574, or 2.3 percent.

-- In eastern St. Tammany, listings soared 68 percent from 736 in August 2005 to 1,234 in October 2006. Average sales prices climbed 16 percent, from $168,456 to $196,146, during the 15-month period.

-- Western St. Tammany saw a 24.4 percent increase in listings, from 894 in August 2005 to 1,112 in October 2006. Meanwhile, average sales prices climbed 13 percent, from $242,372 to $273,530.

-- Orleans Parish, with the exception of Algiers , saw listings increase by 70 percent, from 2,357 in August 2005 to 4,017 in October 2006. Average sales prices fell 21 percent, from $244,793 to $193,381.

-- In Algiers , inventory climbed 63 percent from 227 units to 370 while the average sales price fell by 11 percent from $205,621 to $182,722.

-- The River Parishes saw inventory climb from 302 in August 2005 to 356 in October 2006, an 18 percent increase. Meanwhile, the average sales price in that area climbed 19 percent, from $175,811 to $209,745.

-- In Plaquemines Parish, the average sales price climbed 0.6 percent, from $253,643 in August 2005 to $255,250 in October 2006. Listings fell 17 percent from 70 to 58.

-- St. Bernard Parish's average sales price declined by 53 percent, from $115,741 in August 2005 to $54,511 in October 2006, while listings rose 32 percent from 190 to 250.

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