by Kate Moran, the Times-Picayune
Saturday, January 31, 2009
Resolute New Orleanians have stuck by their city in the face of poor schools, high crime and fearsome hurricanes, mortared here by the unique, soulful culture exemplified in its Carnival celebrations. That singular attachment to place appears to have buttressed the city's housing market during a time of widespread weakness.
After holding aloft during the early months of the recession, home prices across the New Orleans area began a retreat in 2008 that will likely continue this year. The exception was the city itself, where single-family homes gained an average of 4.4 percent in value. All of the suburban parishes, meanwhile, registered modest, if not catastrophic, price declines.
Wade Ragas, a consultant and former professor who prepared the survey of price trends for the New Orleans Metropolitan Association of Realtors, thinks the tide of insurance and rebuilding grants that flowed into the city after Hurricane Katrina helped insulate it from falling home prices. The longer a parish has been recovered, he ventured, the more it resembles wilting markets in other parts of the country.
Yet Ragas sees another factor in play. New Orleans and its institutions have always inspired fierce loyalty from residents who in many cases can trace their roots back generations. He points out that they question of where a person attended high school, often exchanged when city residents first meet, evokes a host of familial and social connotations that might not translate in new-growth suburbs on the north shore.
Ups, downs in Tammany
Ragas said St. Tammany Parish attracts executive types who want safe streets and good schools, but do not necessarily have an ancestral allegiance to the place. The metro area lost more than 85,000 jobs from the first quarter of 2005 to the same period in 2008, and Ragas said the north shore would have been particularly vulnerable to corporate relocations and consolidation in the oil and gas industry.
Still, total employment in St. Tammany Parish climbed by more than 7,000 jobs during that period.
Perhaps more than corporate relocations, the huge number of new homes that flew up in Tammany after the storm has contributed to the ebbing of home prices. Nearly 6,000 homes sold in the parish in the year after the storm, and builders responded with a crush of new construction. As single-family home sales dropped below 2,200 this past year, much of that inventory idled on the market.
"Some people who moved to the north shore after Katrina fixed their houses on the south shore and moved back. Some industries consolidated and moved people to other towns. The combination of corporate relocations and a little bit of overbuilding" has helped dampen prices, said Glenn Gardner, president of Prudential Gardner Realtors.
The slight drop in home prices should not trouble residents who have owned property on the north shore for a while, as they continue to enjoy the stunning equity gains they amassed after Katrina. Although prices fell 5 percent in Covington this past year, they remain 23 percent higher than they did before the storm.
It's more problematic for residents who bought during the 2006 bubble and now want to sell their home and return to the south shore. If they purchased a home with only a small down payment and values continue to tumble, they could be stuck with a mortgage worth more than the house itself: a microcosm of the bust that has afflicted states like Florida and California.
"St Tammany has the preconditions that breed foreclosure activity," Ragas said.
Loyalty to St Bernard
Councilman George Cavignac of St Bernard Parish said he has heard from constituents who want to return but feel trapped on the north shore because of their negative equity. Home prices waned by less than 2 percent last year in St Bernard, which nonetheless held up better than St Tammany, with its 6 percent decline, and Jefferson, with its 3 percent decline. Chalmette, where the largest number of sales took place, actually posted a 2 percent gain.
If Ragas' theory holds true, St Bernard outshone other suburban parishes because it elicits the same sort of brand loyalty that New Orleans does. Cavignac said prices have also held steady because they were artificially low before the storm. Residents of the tight-knit parish historically bought real estate from relatives who gave a discounted price, but the high cost of construction after Katrina has pushed values to a more market-driven standard, he said.
Although New Orleans was alone in posting overall gains last year, home prices showed more motley results when examined at the neighborhood level. Historic areas such as Uptown and the Garden District boasted strong appreciation, with average home price in the tony 70118 postal code topping $500,000.
Prices also climbed in recovering Lakeview, while dropping 11 percent in slower-to-rebuild Gentilly. Eastern New Orleans registered some of the most formidable price gains, largely because middle-income buyers can get more square footage for their dollar there than they can in the city's historic center, real estate agents said.
"It's also a very prideful community, much like St Bernard," said Arthur Sterbcow, president of Latter & Blum.
Encouraging signs
While several real-estate agents said 2008 was their dimmest year in recent memory, they pointed to some hopeful signs.
Although the volume of home sales plunged from 11,334 in 2007 to 8,126 in 2008 -- a decline of almost 30 percent -- prices fell by only 1.3 percent in the metro area as a whole. The region has also been spared the rampant foreclosures that continue to depress home prices in states like California, Florida and Nevada.
The nation's housing woes have nonetheless alighted on the New Orleans area in the form of more stringent lending standards. Sterbcow and others said the increased cost and difficulty of borrowing money has pushed some first-time buyers to the sidelines, gumming up the market for existing owners who want to sell their starter home and trade up to more affluent subdivisions in St Tammany, for example.
After holding steady for the first half of 2008, prices dipped in Jefferson Parish in all but one postal code by close of the year. Although the decline is partly tied to the lack of first-time home buyers, Lynda Nugent Smith of Keller Williams said updated houses in Jefferson and other parishes continue to sell. Buyers, perhaps impatient with the idea of home repairs after Katrina, are turning away from fixer-uppers.
"There is nothing new about Jefferson Parish anymore," said Smith, the risk management broker at the company's East Jefferson office. "Most of the inventory I see sitting on the market has the 8-foot ceilings, paneling and shag carpet. That's not what people want today."
Although 2008 proved a difficult year for real-estate agents, Margie Inman, broker-owner of Coldwell Banker TEC, said she has started to see a thaw in recent weeks, perhaps because of falling interest rates and a renewed sense of confidence spawned by transition in the White House. Sterbcow, of Latter & Blum, said traffic on his company's website has been strong.
If interest rates for borrowers with decent credit continue to hover around 4 percent in the coming year, Ragas said opportunities will abound for savvy home buyers.
"There could be unbelievable buying opportunities with falling prices and low rates," Ragas said. "It could be an incredible lift for the housing market."
