Residential real estate professionals are undoubtedly among the most optimistic people on the planet. That is because people who sell homes for a living keenly understand the adage that “perception is reality.” Sales agents know that if consumers begin to believe home values are headed downward, that belief can weigh on the market – even if the view is mistaken.
During bumpy economic times, sensitivity to public perception leads real estate analysts to be measured in their assessments of market trends. And true to form, experts who presented short-term forecasts during a recent economic conference in New Orleans offered a conditionally hopeful view.
Lawrence Yun, chief economist for the National Association of Realtors, paints a fairly rosy picture as he points to indicators he believes show a recovery in home sales.
On the housing front, he says, the number of foreclosures of single-family homes is declining from a peak reached in 2010-’11, so the previously substantial inventory of properties for sale has begun to thin. In Louisiana, which never experienced the high volume of foreclosures seen in some other states, this “shadow” inventory is slowly diminishing, Yun says.
Meanwhile, because sales were sluggish for an extended period, housing prices are down in most parts of the country. The available stock of affordable homes combined with increasing job creation is pointing to an uptick in future sales, Yun says.
The association’s research shows that as of September, home sales across the country were about 11 percent higher than a year earlier, and the median price, at $183,900, also was up 11 percent.
In addition, Yun cites the stock market’s recovery from a 2008 plunge, rising residential rents and a growing pool of renters as signs that the “smart money” will be chasing real estate investments.
“I look for a 10 percent increase in home sales this year followed by single-digit increases thereafter,” he said.
Yun also suggests that talk of the country falling off the “fiscal cliff,” if current tax policies are allowed to expire next year, is overblown. “I don’t see elected officials letting the country go into recession,” he says.
Tempering Yun’s enthusiasm, local real estate analyst Wade Ragas presents a more narrowly focused forecast that took into account special factors influencing the New Orleans market.
Ragas says that a post-Hurricane Katrina recovery in local jobs has begun to level off, in part because government jobs have been shrinking. Closures of businesses or business lines such as those at Northrop Grumman’s Avondale Shipyard on the West Bank and the NASA facilities in eastern New Orleans and Stennis, Miss., have produced big job losses in the region. “Slidell and the eastern side of the market have been hammered by those changes,” Ragas says.
He also pointed to the unusual federal boost that New Orleans received in the form of FEMA and other recovery funds over the past half-dozen years. Of about $42 billion worth of funding for new construction, less than a quarter of the total remains to be built, largely encompassing medical projects. “In the next few years the benefit of that spending will run out,” he says.
The post-Katrina environment also skewed the local housing picture, Ragas notes. He says that New Orleans reached its highest rate of new construction in 13 years when nearly 1,400 homes were built during 2008, but the pace of building is slowing.
On the other hand, Ragas is upbeat about local housing prices. The area is in a recovery, he says, where prices are either stable, meaning they’re no longer declining, or they’re in an upswing. “I think that’s a strong vote of confidence in the local market.”
He adds that occupancy of rental homes and apartments is strong and that rents, while not rising sharply, are holding at fairly high levels.
Ragas also describes the commercial side of the real estate market in relatively buoyant terms. The New Orleans business district is enjoying a “renaissance” in terms of apartment and condominium construction, grocery stores and renovations completed or under way at big properties, such as the Superdome, the Hyatt Regency New Orleans and the Saenger Theatre, he says.
Construction of a new streetcar line along Loyola Avenue bodes well for public transportation overall, Ragas said. Not only will it allow visitors to link with other lines and go “virtually anywhere in downtown New Orleans without moving a car,” but it provides a starting link for a possible future rapid transit connection to the airport. “I think this is going to turn out to be an important transportation event,” he says of the new streetcar line’s opening.
Ragas says a revamp of concourses at Louis Armstrong International Airport and strength in cruise passenger business out of New Orleans bode well for an ongoing robust tourism sector, which has almost fully recovered from the post-Katrina downturn. The 2013 Super Bowl being held in the city will help solidify the city’s stature in the tour and travel industry, he says.
Back on the residential side of the market, Ragas notes a “sleeper” that’s finally starting to move ahead: the replacement of the Iberville Housing Project. The demolition of the old high-density housing project and construction of modern, low-density units will help anchor the string of renovation and redevelopment that stretches across Canal Street to the medical district and along Loyola Avenue past City Hall.
The prospects of major redevelopments, Ragas says, linked by improved public transportation, are strong positive indicators for the city at large.