Own a damaged home in the area and still pondering what to do with it? Here’s your best advice: Fix it or forget it.
A full two years after the events that changed everything, the widely varying condition of thousands of New Orleans-area homes promises to keep the real estate market unsettled for the foreseeable future. And “unsettled” is putting it delicately.
The fact is, the local housing market is just about as choppy and hard-to-read as it can possibly get. Which means that people who hope to become either buyers or sellers need to get a grip on their expectations and be prepared for the long road that probably lies between them and a transaction.
Just how long the road is depends largely on where you’re shopping or trying to sell. Halfway through 2007, local real estate professionals were still trying to get a fix on the slippery conditions as they assessed prospects for the future. Longtime real estate watcher Wade Ragas, whose consulting company, Real Property Associates, recently did an in-depth assessment of the local market, lays it out this way:
• If you live in Orleans Parish and own a home that didn’t flood in the Katrina debacle, the house may be worth less than it was in 2006 (when demand far exceeded the supply) but you could sell it today for a little more than the price it would have fetched pre-Katrina.
• If you’re shopping for a home on the West Bank, your chances of finding a bargain are slim because of the generally tight market conditions there. Likewise, if you’re looking to sell a quality West Bank home, you’ll be pleased – though not necessarily ecstatic – with the offers you’re able to draw.
• Jefferson Parish, east and west of the river, presents a motley mix of opportunities for buyers and sellers. Pockets of high demand and sections of lower quality are keeping the overall market somewhat volatile.
• In both Orleans and Jefferson parishes, transactions seem to hit a road block when the asking price is above $300,000. Sales in the $200,000s and below have a much better chance of closing, Ragas says. He adds that properties priced at $1 million or more may also stand a pretty good chance of selling, though he doesn’t have enough data to confirm a trend.
• In St. Bernard Parish, while many plucky homeowners have struggled to bring back devastated neighborhoods, sellers still far outnumber buyers, ensuring that values will remain under heavy pressure.
• The previously booming St. Tammany Parish market, where so many south shore residents relocated after Katrina, has settled into a more sluggish growth pace in 2007. Home prices have not gone into reverse since last year but their climb is slowing. The housing overstock produced by the post-Katrina building frenzy put the brakes on the action.
By all appearances, the local housing market is still searching for a new “normal” in an environment that is anything but. With large numbers of homeowners still in real estate limbo – whether held back by insurance issues, Road Home snafus or their own ambivalence – local real estate is generally not a sure bet for anyone.
That said, there’s a lot to be said for spending the time and money necessary to put your damaged home back into shape.
“If you renovated a house that was flood-damaged, the good news is those houses are selling for around the same prices they would’ve brought in 2005,” says Ragas, who has analyzed home sales in most of the major sections of greater New Orleans. “To me, that’s a big vote of confidence.”
Ragas says the assessment applies particularly to the large neighborhoods of Lakeview and Gentilly, both of which suffered mightily in the flood.
Renovated home prices in areas to the east of the Industrial Canal are not as strong as they are to the west, but owners there who have managed to sell have received prices that “are not far from their 2005 levels,” he says.
On the other hand, if you own a home that was inundated in the flood and you still haven’t repaired it – or you simply gutted it and left it bare – your sales prospects are far from bright. Ragas says values on such properties are continuing to decline. In many cases, prices have dropped below the pre-Katrina value of the empty lot and they haven’t yet hit a bottom.
“Just letting it sit and hoping that somebody eventually buys it is not going to work, because the price is just going to go lower and lower,” he says.
Owners who spent the money to put their damaged homes back in shape have more than one reason to be glad they did. In the two years since Katrina, construction and renovation costs have risen so much that many owners who received insurance or other payments for rebuilding now find that the money falls short of their needs.
The cost of many building materials soared in the months after the storm. While prices on some materials, such as lumber and sheetrock, have come down in recent months, contractors are still grappling with a labor shortage. Housing analysts say overall renovation costs – now running from $100 to $150 per square foot and up – are contributing to the slow pace of recovery in New Orleans. But they also say the picture is gradually improving.
“Materials prices have quit going up as fast as they were and there’s a little greater availability of skilled labor than there was for a while,” Ragas says. Noting that plumbers and electricians have worked through some of their backlog, he adds, “There’s a little better opportunity to get quality work now.”