If you’re a homeowner who ranks the roof over your head among your most valuable possessions, here’s an added reason to celebrate the new year.
Home prices are headed upward. And while the market may not turn uniformly hot throughout the area, many New Orleans owners who are thinking of putting a house on the market could be poised to profit.
Richard Haas, president of Latter & Blum Inc., says one factor influencing the outlook for home prices in the new year is the recent presidential election.
Haas says that a sense of optimism has taken hold around the country that government policy under the new administration may become more business-friendly. He also thinks that the investing climate, which took a distinct upward turn after the election, will continue to be strong well into 2017.
Haas looks for an increase of about 5 percent in total sales volume in 2017, about a half-percentage point above the expected final tally for ’16.
The predicted rise in volume would be steeper, he says, were it not for “opposing forces” at work in the local market. On one hand, a stronger outlook for oil prices bodes well for job growth in the energy sector. But meanwhile, mortgage interest rates will likely continue to increase, thus making home purchases more expensive and particularly affecting first-time buyers.
“Rising interest rates will have the effect of slowing the market at the same time that oil and gas will give it a lift,” Haas says.
The areas with the greatest potential to see home price appreciation this year are the same ones that have enjoyed strength in the past: Garden District, Uptown and Lakefront, for instance. Across Lake Pontchartrain, west St. Tammany Parish will continue to be active, Haas says. “Those are the areas that will drive the local price increases.”
Haas also points to hotbeds of activity such as Bywater, Marigny and portions of Mid-City. These areas are targets for many people who see neighborhoods such as the Garden District and Uptown as too expensive, and for younger buyers who are interested in investing sweat equity into a more reasonably priced property to boost its re-sale value.
One of the most prominent features of the New Orleans housing market is activity in the Central Business District. “A major trend affecting the city is migration into the city proper by Millennial home buyers,” Haas says.
Around the country, young buyers are showing a preference for inner city residences that put them within walking distance of good restaurants, performing arts venues and other hubs of activity. In New Orleans, that trend has fueled the development of many new apartments in the downtown area and the Warehouse District.
The largest such project continues to grow, as South Market District, a mixed-use development by the Domain Companies that includes high-rise residential buildings, expands.
The newest component in the complex of apartments, restaurants and retail offerings that covers a five-block area is the Standard. The 15-story residential tower now under construction will contain about 90 units, and will join two other residential buildings, the Paramount and the Beacon, completed earlier.
Latter & Blum research shows that 12,097 New Orleans homes changed hands during the first three quarters of last year, up nearly 9 percent from the same period in 2015. The dollar volume of homes sold during the first nine months of ’16 topped $5.3 billion.
However, Haas believes that, even as prices rise in the coming year, actual sales activity could slow a bit, in part due to the impact of rising financing costs on first-time buyers.
“I expect a gradual increase in mortgage rates,” Haas says, noting that current rates are about 2 percentage points below averages seen during the past three decades. “Is there room for rates to increase and have home-buying still be historically inexpensive? Yes,” he says.
But Haas also points out that if rates rise from 3.5 percent to, say, 5 percent, it could test the limits of people who stretched their borrowing capacity to buy their current homes.
“The effect of that would be to slow the move-up market and freeze some people in place,” he says.
Meanwhile, real estate experts remain excited about the prospect of a major new development in the downtown area that has had difficulty getting off the ground. The remake of the aging World Trade Center building into a Four Seasons hotel and a number of floors of luxury private homes will be the largest downtown project undertaken in decades.
A rival bidder on the project filed suit last year to stop Four Seasons from proceeding, and a state court judge recently threw that bidder’s case out of court. But new attorneys for the bidder have vowed to appeal the ruling, creating yet another delay.
If the project ultimately goes forward, it will contain high-end condominiums with “concierge lifestyle” amenities not seen before in New Orleans. The prospective buyer, Haas says, is “someone who is at a point in life where they can well afford the luxury lifestyle that Four Seasons will provide.”
As of November 2016, the real estate market encompassing the east bank of Orleans Parish was “mildly active,” according to a market report from the New Orleans Real Estate Investors Association. The report, by Birdsong Realty Group, shows that:
• The median price of a home sold in November was $387,000.
• A home listed for sale stayed on the market for 42 days before being purchased.
• Homes priced between $1.3 million and $1.4 million sold the quickest during the six-month period ending in November.