While the volume of home sales plunged across greater New Orleans in the past year, real estate here has not suffered the freefalling prices and rampant foreclosures that have chilled the economy in California, Florida, Arizona and other hothouse markets.
Two local real estate experts who spoke Thursday evening at a forum sponsored by the Home Builders Association of Greater New Orleans gave a relatively strong prognosis for housing in this region, where the tide of insurance and recovery grants have helped insulate the economy from national pressures.
"It did not start here, and it is not very deep here, " Arthur Sterbcow, president of Latter & Blum, said of the housing crisis.
Home sales plunged last year across the metro area to 1,200, down from 1,900 the year before Hurricane Katrina and 2,200 the year after the storm, according to Sterbcow. At the same time, the inventory of homes listed for sale has started to fall in recent months, indicating it could become easier to sell a home.
Sterbcow noted that the gap between the supply of homes on the market and the number of buyers looking to snatch them up has started narrowing, and in many parishes the divide is smaller today than it was during the oil bust of the late 1980's. Mandeville is one of the few areas where the gap is greater now than it was then.
Yet neither Sterbcow nor real estate consultant Wade Ragas predicted a boom year for the home builders who formed their audience Thursday night. As the supply of new homes, especially on the north shore, continues to outstrip demand, builders have curtailed the pace of new construction. A number of them, unable to find buyers, have lost newly build houses to foreclosure.
Ragas, a retired University of New Orleans professor, said demand has slackened because many of the high-paying jobs tied to the oil and gas industry left the region after Katrina. The problem is not that builders saturated the north shore with too many homes, he said, but that potential buyers moved to other cities after the storm.
Ragas noted that the region has 68,000 fewer jobs today than it did in July 2005.
"The only way to fix an over-supply is to stop building, " he said. "You are doing what's needed to get back in balance, it just hurts like hell."
Ragas told the home builders that the recession infecting the American economy is the worst since the Great Depression. While he expected to see glimmers of recovery after President Obama's stimulus plan had a chance to take effect, he predicted the economy would make a second drop some time in 2010.
"This is the worst since the 1930's. There is not much question of that," Ragas said. "But it does not have the ferocity of the 1930's."
In New Orleans, he said, the nation's economic troubles would have the most dire consequences for the tourism, hotel and restaurant industries. The region has fewer residents but more restaurants than it did before the storm, a mismatch that would likely force some eateries out of business in the coming years.
Ragas also predicted some troubles in the apartment sector in New Orleans, which he said has become overbuilt since the storm. While the cost of construction remains somewhat high, consumers cannot afford rents at a level that will produce a large return for developers, he said.
At the same time, Ragas saw positive signs in the fact that insurance rates for single-family homes have begun to come back down to earth in greater New Orleans. Ragas praised Louisiana's insurance commissioner, Jim Donelon, for not making the same threats that recently drove insurance companies out of Florida. Sterbcow concurred.
"We have made great strides on insurance," Sterbcow said. "It's high but palatable."
It is another affirmative signal for greater New Orleans that the foreclosure crisis has amounted to a "non-event" here, he said. Less than half a percent of all households in Louisiana had a home caught up in some stage of foreclosure at the end of 2008, compared to 7 percent of all households in Nevada and 4 percent of all households in California, Sterbcow said, citing figures from the research firm, RealtyTrac.
Awful as Katrina was, Sterbcow was thankful that the storm hit three years ago rather than today.
"Can you imagine if Katrina had hit us this August, in this economy?" he said. "It hit us at a time when it was survivable for us."
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