October 2023 New Orleans Market Update

Based on the latest economic data and real-world experiences of McEnery Residential’s clients and agents, this month’s market update can be summarized very simply:

It’s Choppy!

But what does that mean?

• We are seeing multiple offers on the best houses. And “the best houses” doesn’t mean “only the best neighborhoods.” This past weekend we had strong showings – and accepted offers – at a $600-ish house, a $200-ish house, and a $1.3M-ish house.
• What did these “best houses” have in common? Sellers who were realistic about pricing, willing to partner with expert agents, and prepared to get their houses in great showing condition. That doesn’t mean the houses are perfect – one needs the floors to be refinished; but it was staged well, priced well, and in a good location. No house is perfect, but these houses were perceived as some of the best values in the past week.

What about the rest of the houses that seem to sit?

• The market data is not awful by any means, but overall, houses are taking longer to sell and selling for less. Sellers who are serious and reasonable understand the situation, and buyers are responding accordingly.
• Buyers today have more to choose from, and less competition. Unlike two years ago, buyers today do not have to make rushed decisions in order to make an offer.
• Interest rates have stolen about 40% of buyers’ purchasing power in the past 2-3 years. Most buyers, though, understand that the sub-3% rates were a historic anomaly, and understand that if they want to buy today they need to work with their lenders and agents to set realistic budgets.
• Sellers need to understand that mortgage rates, and insurance, have shrunken the pool of buyers in their price range, and they need to set realistic prices to attract buyers.

Macroeconomic Update

Cullen Roche published a recent article about the real estate market that is a bit sobering. Nationally, the number of sales has fallen about 40%, year-over-year. While prices have held up much better (good for sellers), this represents a significant drag on a large portion of our economy. Realtors, lenders, and title companies are obviously feeling it, but home improvement, furnishings, and other industries thrive when home sales are high. He explains that either rates need to come back down below 5% (historically normal-to-good) and/or home prices need to come down. Since homeowners today have much more equity than in past downturns, free-falling prices, and foreclosures are not happening at the moment. On the other hand, homeowners with equity and low existing mortgage rates can stay on the sidelines, which is keeping inventory lower.

Key takeaways from the latest local data:

• Are prices going up or down? The median list price chart for 70115 (Uptown New Orleans) shows seasonality is back after the pandemic. In other words, prices go up and down between slower months and busier months. Overall, the pricing trend appears positive (increasing). Since January, list prices have seen a steady decline by 9.5%. ($790K to $715K). Again, seasonality in some years exceeds 10%. No need to panic!

• Looking at the City of New Orleans data, the seasonality effects are much less evident, and there has been about a 10.7% decline in list prices since last summer ($391K vs. $349K). However, median list prices are still above fall 2019 levels (pre-pandemic). Anecdotally, the insurance rates seem to be higher in lower price points than in higher price points. This hits purchasing power harder for more modest-income buyers. This may be further dampening demand, and sellers are responding by lowering asking prices.

Inventory is Climbing

• In Uptown New Orleans (70115), the number of houses for sale has increased 46% since last spring, but is still 22% lower than pre-pandemic levels!

• In the overall City of New Orleans, the number of houses for sale has increased 264% since last spring and is now back at pre-pandemic levels.

Conclusion: The market data is finally showing how buyers and sellers are experiencing the effects of high mortgage rates and skyrocketing insurance premiums. The average days on the market (time to get an offer) is several months, but those “averaging” charts don’t show that the best houses are still selling quickly. While it is taking a week or two to sell the best houses, we still see that good prices, conditions, and neighborhoods remain in demand here in New Orleans.

All of this information can be overwhelming, and market data is always about looking backward. The New Orleans market is always defined house by house and block by block, so if you have questions about buying or selling today, please get in touch and we will guide you to success!