Editor’s note: This is the first part of a two-part series examining the real estate market in the New Orleans area, four years after it was ravaged by Hurricane Katrina. Read the second part: "The new New Orleans."
By SERGIO MOSQUEDA
In New Orleans, you don’t need a calendar to remember Hurricane Katrina — four years later, its deep scars are still very visible in the area’s real estate landscape.
Saturday, Aug. 29, 2009, marks the fourth anniversary for the Louisiana landfall of one of the most devastating hurricanes in U.S. history.
Hurricane Katrina killed an estimated 1,836 people in the Gulf Coast region, destroying or damaging hundreds of thousands of homes and displacing an estimated 750,000 households.
Today, New Orleans proper is a motley collection of homes, with stretches of high-end homes standing next to gap-tooth subdivisions in a city that has yet to repair one-quarter of its Katrina-damaged housing stock.
The New Orleans Index, a research project begun by the Brookings Institution Metropolitan Policy Program in December 2005 and now a collaborative effort with the Greater New Orleans Community Data Center, reports that the "New Orleans economy is weathering the recession relatively well due in part to its industry composition."
Even so, the latest report, released this month, found that "the housing market has stalled, with home sales down 39 percent and new construction down 48 percent." The report also found that the number of homes sold in the New Orleans metro area fell 23 percent from May 2008 to May 2009, with 686 home sales for the month.
And the pace of home reconstruction and new construction has slowed: the monthly average number of residential permits issued in the city of New Orleans was 420 from the months of September 2008 to May 2009, compared with the 676 monthly average during the September 2007 through August 2008 period and the 912 monthly average for the prior year.
Blight also remains a big problem, with 53 percent of residences in St. Bernard Parish and 31 percent of residences in Orleans Parish sitting unoccupied as of March 2009.
"New Orleans has 65,888 unoccupied residential addresses — nearly as many as Detroit," the report also states. And "many essential service workers in the New Orleans area cannot afford the fair market rents of an apartment in the region."
The population of residences receiving mail within the city of New Orleans has reached 76.4 percent of its pre-Katrina level as of the August 2009 report, up 4.3 percentage points from August 2008.
Those who stay, returned, or made it a new home continue to shift the real estate market’s topography and demography. Some buyers are choosing high, dry areas and populating the formerly rural area north of New Orleans.
St. Tammany, across Lake Pontchartrain and north of New Orleans, has more than doubled in population from Pre-Katrina levels, said the chief of staff of a New Orleans development hub. Areas once priced out from some buyers are now affordable.
Some young professionals are moving into those regions that were disproportionally hard-hit by Katrina.
Keller Williams Realty Westbank real estate agent Lisa Heindel said she thought after Katrina, "Oh — my god — I’m not going to have a job. But right after, my phone started ringing for close to a year." What’s happened since this initial Katrina real estate boom?
The city had a 7.3 percent unemployment rate in June — which is less severe than some other states are experiencing given the state of the economy — so consumers do buy homes but buy less home, said real estate professionals.
They say buyers are shying away from homes priced above $100 a square foot and choose homes below $200,000.
The high-end market is slipping, said Susan Daigle, an agent with Coldwell Banker TEC Realtors. "There are not as many high-end jobs in this economy (to support) high-end sales." …CONTINUED
"The price decline just started," said Wade Ragas, a New Orleans real estate analyst, and some expect a 10 percent home-price decline this year compared to 2008.
Katrina hit during an unprecedented U.S. real estate boom, and that national boom aided the Gulf region’s recovery in the aftermath of the disaster.
The National Association of Realtors reported that the New Orleans metro area experienced a 15.9 percent spike in the median price of a single-family resale home in 2005 compared to 2004 — that compares with a 12.2 percent national median-price increase.
And even with the crushing blow of Katrina in 2005, the median home price for the New Orleans metro area rose 8.7 percent in 2006, compared with a 1.3 percent national increase in 2006.
In 2007, the New Orleans market turned, with the median price of single-family resale homes in the New Orleans metro area dropping 7.4 percent from the prior year — exceeding the national decline of 1.8 percent.
Prices have lately held up better in the New Orleans area than for the nation as a whole. The metro area’s median price for resale homes actually rose 0.1 percent in 2008 compared to 2007 while dropping 9.8 percent nationally; and the median price slipped 1.7 percent from second-quarter 2008 to second-quarter 2009 while falling 15.6 percent nationally.
The New Orleans Metropolitan Association of Realtors anticipates a 10 percent price drop for the area this year. Flooded homes are losing value faster than restored homes, and banks have generally cut back on construction financing.
New Orleans foreclosure rates increased 18 percent from last year and Arthur Sterbcow, president of brokerage company Latter and Bloom, said in a radio interview that foreclosures represent 1 percent to 1.5 percent of the market.
Some investor-owned homes "are being repaired but (aren’t) being sold," said John Murden of Murden Appraisal Service Inc.
And the national housing crisis is catching up with New Orleans — if not through foreclosures then through the tight credit market.
Now, creditors no longer take a buyer’s word for good credit.
While New Orleans did see the good times roll during the national real estate boom, it wasn’t like the wild times experienced in some other local markets, said Guy Williams, president of Gulf Coast Bank.
The timing of Katrina spared New Orleans from the brunt of the economic crash. "Katrina saved us," said Keller Williams West Bank agent Joyce Guidroz.
But Katrina also brought fear. "Come hurricane season people get gun-shy," said Adrian Pappalardo, president of the New Orleans Metropolitan Realtor Association.
If a storm brews in the Gulf, insurance companies are more reluctant to insure homes, and they have shelved closings until the storm dissolves. Buyers, for their part, first ask about a home’s flood zone and annual flood insurance premiums.
Buyers can be a bit more picky, too, in this oversupplied market.
"It used to be location, location, location — now it’s condition, condition, condition," said Guidroz.
St. Bernard, one parish hit hardest by Katrina, was booming before Katrina and now per-square-foot prices in one area of this parish have declined 30 percent. Guidroz listed a flooded 30-year-old home that was repaired to like-new condition — it sold near the price of a damaged home.
Another real estate agent wrote four offers for a buyer on as many homes. However, the buyer would consistently underbid, so she ignored the buyer’s fifth request. "Buyers are just incredible," she said. …CONTINUED
Real estate professionals straddle shifting home prices, increasing supply, and a low sales volume (down 30 percent, according to Ragas).
Roughly the same number of real estate agents serve New Orleans compared to the pre-Katrina days, and some of them are doing very well.
Others "are hanging on a wing and a prayer — there’s so much on the market," said Guidroz.
The nature of the real estate business has shifted somewhat, too, and real estate agents say it’s more common to gravitate toward Web leads and marketing these days than to rely exclusively on cold calls and print ads.
Some agents who are not so tech-savvy have retired or entered jobs in other industries. Daigle, who has been a real estate agent for 18 years, said business was worse last year than during her first year in real estate.
The Big Easy is still missing 13 percent of its pre-Katrina labor force and one-third of its population.
Local parishes have twice contested the U.S. Census’ New Orleans population count and contested a local accounting agency’s population count. More population equals more money from the federal government.
Government agencies are still doling out assistance.
Louisiana’s Road Home program assists residents of hurricanes Katrina and Rita return to their homes or purchase another home in Louisiana or elsewhere — that program has disbursed an estimated $7.98 billion as of Aug. 24, 2009, according to the program’s Web site, with 151,808 eligible applications received.
Louisiana has repealed some capital gains-related taxes for business owners and offers incentives to attract creative young professionals. Jefferson Parish recently asked the federal government for $10 million to protect storm-blighted neighborhoods.
Road Home is auctioning off some properties, now mostly empty lots, in Jefferson and other parishes. The increased supply will decrease raw land prices, said Pappalardo.
In some cases, homeowners who completed home repairs didn’t receive any government funds to help raise the homes (to prevent future flood damage) until years after the initial repairs were carried out.
Other owners raised their homes first and then used the government funds associated with this work to complete basic property repairs, noted Murden.
Heindel said she expects "slow and steady (home value) growth" in the region.
Ragas said he expects annual growth in home values of about 5 percent to 7 percent once the market returns to normalcy.
The Big Easy’s location is an asset, he said, with its major industry sectors of energy and transportation serving to prop up the local economy and move counter to U.S. economic cycles.
Even so, the New Orleans market hasn’t yet moved fully outside the shadow of the storm that struck four years ago.
Sergio Mosqueda is a freelance writer in Mississippi.
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