Look at it this way: If you’re the sort of person who truly believes there’s no place like home, you can probably just ignore the current housing market. Why fret over the direction of home prices? If you’re happy in your abode, be assured that your home-loving ways will serve you well. In fact, if you aren’t the “nesting” type, one who prefers the comforts of home to just about anything else, maybe you should consider changing your ways.
Homeowners throughout the country who were hoping to move up, downsize or relocate have had to grin and bear it for the past few years as market conditions have made selling tough. The local housing market has been a mixed bag during these times, showing resilience in some areas, merely holding its own in others. Because it wasn’t as hard-hit by the real estate decline as some other cities were, local analysts had hoped that New Orleans housing would be in a climb by now. But what they didn’t know would come to hurt.
A year ago, New Orleans-area real estate specialists were optimistic that by late 2010 the national economy would show clear signs of returning strength, and that local conditions, too, would improve. What no one foresaw was a major oil well accident in the Gulf of Mexico.
The blowout of a BP oil well just off Louisiana’s coast on April 20 was obviously disastrous, instantly claiming 11 lives. But the broader impact of the explosion would take months to unfold. Even today, it’s difficult to gauge the full effect.
What we do know is that the blowout and a subsequent federal moratorium on deepwater drilling in the Gulf took a big toll on the local economy. Not only were oilfield workers and commercial fisherman idled, but the massive tourism economy of the New Orleans area also suffered from negative – if largely unjustified – public perceptions following the accident.
Then came another stunning blow: Northrop Grumman, owner of longtime major employer Avondale Shipyards, announced its intention to close the local yard by 2013. Avondale employs some 5,000 people in Bridge City, and the state estimates another 7,000 local jobs are endangered by the builder’s decision to pull up stakes.
Veteran local real estate broker Arthur Sterbcow says events of recent months have cast a pall over the housing market. After the oil well explosion, he projected a decline of as much as 15 percent in both the average median home sale price and the number of local houses that would be sold in the coming year. He made that projection even before news of the Avondale closure broke.
Now, he says: “There’s not a single market that’s not going to be impacted by this huge unbalancing of the work force.”
Ordinarily indefatigable in the face of economic bumps, Sterbcow says real estate market conditions today demand levelheaded thinking, particularly on the part of home sellers. “Some sellers here are just going to have to get realistic and reduce their price,” he says.
Along with actual and anticipated job losses that have made potential homebuyers fearful, Sterbcow points to other factors that are influencing the market. After the national economy tanked and threatened to take the nation’s banks down with it, federal banking regulators severely tightened lending standards. As a result, even after banks began to recover, many borrowers who previously could have landed a home loan in a New York second could not qualify for a mortgage. Sterbcow estimates that close to 30 percent of people who could have obtained a loan two years ago are shut out by today’s stiffer lending criteria.
Meanwhile, the government has ended a program that for a time helped draw buyers into the market. The homebuyer tax credit, initially passed as part of the federal Housing and Economic Recovery Act of 2008, has come to an end. “There was a healthy base of business that came because of the tax credit, and in the second half of year we don’t have that,” Sterbcow says, though he adds that current low interest rates may help lure some borrowers anyway.
Despite the dour outlook, Sterbcow says he wouldn’t rank current conditions as the worst ever. “This is the third really bad market I’ve seen in my real estate career, but it’s still not as bad as the oil bust of the 80s,” he says.
And for well-equipped buyers, he insists the market holds promise: “There are buys out there I thought I’d never see.” Not only are single-family homes and small commercial properties available at attractive prices, “but you don’t have all that competition bidding against you,” he says. That, plus rock-bottom interest rates, may put qualified buyers in the shopping mode. “When you can get a 15-year mortgage at 3.5 percent, you’ve gotta look at that,” he says.
Some parts of New Orleans, such as the French Quarter and Uptown, remain hot in terms of demand and price, and eventually other areas will rebound as well. Ongoing renovations and rebuilding in Lakeview, Mid-City and other sections will likely draw shoppers as conditions improve.
For the moment, one of the most important indicators to watch may be the weather. “The real wild card is hurricane season,” Sterbcow says. “A non-eventful season would be fabulous for the city.”
Sterbcow believes that if the Army Corps of Engineers can finally complete their work to bring local levees and floodwalls up to the magic “hundred-year flood” protection level, it could make a big difference in the real estate market. “By next year,” he says “as those projects get finished, I think we’ll see some changes in FEMA flood maps, and some insurance companies will begin to lower their rates. I hope – and expect – that it will happen.”