Single-family home prices in New Orleans posted double-digit increases in the first half of this year and have now climbed nearly 50 percent from the period just before Hurricane Katrina.
Sales of single-family homes that were in average-or-better condition climbed 10 percent in the first six months of 2015, compared with the latter half of 2014, consultant Wade Ragas said Tuesday.
His numbers come from the New Orleans Metropolitan Association of Realtors and Gulf South Real Estate Information Network. The data do not include sales of multiple-family homes, townhouses, condominiums or vacant lots.
The ZIP codes in New Orleans that saw the most sales activity included Gentilly, Lakeview and the swath of Uptown between Nashville and Washington avenues, from South Claiborne Avenue to Tchoupitoulas Street.
The biggest increase in home sales during the same stretch among homes in good condition happened along the edge of the French Quarter, Marigny and parts of Treme and the 7th Ward.
For the first half of the year, the average sale price for a single-family home in New Orleans was $339,743, or about $166 per square foot, according to Ragas’ analysis. By contrast, the average sale price before Katrina was $228,620, or $114 per square foot.
Across the region, average home prices were up 6.1 percent overall.
New Orleans saw the biggest gains, followed by Belle Chasse in Plaquemines Parish, where prices rose 7.9 percent, and St. John the Baptist Parish, up 6 percent.
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In the decade since Katrina, home prices in New Orleans have climbed at an average rate of 4.6 percent per year, totaling almost 46 percent. Taken together, the entire eight-parish area Ragas studies had a more modest total gain of 18.6 percent.
In Jefferson Parish, prices stayed flat in the first half of the year compared with last year, and ultimately were up 1 percent compared with a decade ago. Parishwide, home sales averaged about $194,510, or $106 per square foot. Neighborhoods with the highest prices per square foot included parts of Old Metairie and Bucktown, where homes sold for an average of $494,724, or $204 per square foot.
Despite New Orleans’ sharp growth in average sales prices over the past decade, Ragas said the city’s pace isn’t any more rapid than growing metropolitan areas such as Dallas, Houston or Miami. The difference is that New Orleans has historically low rates of wage growth, which has further driven a divide between home prices and area income levels.
“We have a surge in demand, but we don’t have enough inventory to keep that at an affordable level,” Ragas said. “Problems like this tend to solve themselves if markets are left alone.”
In New Orleans, part of that solution is likely to be the construction of more apartments units, Ragas said. In the past, apartment units grew at a clip of about 500 per year. Now, there are 1,400 units under construction, with perhaps 1,000 more on the way.
“That’s a big increase in available housing, and we’ll probably solve this housing shortage, but we’ll solve it by more households staying in renter mode rather than being able to buy,” Ragas said.
Meanwhile, fewer homes are getting built and fewer homes in good condition are hitting the market, he said. That has led to “a real dearth in listing activity” despite a glut of buyers, including potential first-time buyers and current homeowners looking for an upgrade or interested in moving closer to the city’s center.
At this point, New Orleans’ most reliable source of new housing is coming from renovations of old houses, especially in Gentilly, which saw a larger number of sales of non-renovated single-family homes in the first half of the year than most of the city. In Gentilly, damaged homes sold on average for $48 per square foot in the first half of the year, compared with $121 per square foot for homes in good condition.
Meanwhile, clusters of apartments or condominiums are springing up in and near the French Quarter. In some cases, third- or fourth-floor spaces that had gone unoccupied are now being furnished. In other cases, buildings in the historic neighborhood itself or in the nearby Marigny Triangle are being updated and renovated.
Richard Haase, president of New Orleans-based Latter & Blum, said he believes that the spike in average square foot prices could continue beyond the first half of the year.
But looking at the bigger picture, Haase said the 46 percent rise in prices over 10 years isn’t so startling when two factors are considered. Much of the city’s lower-priced sales volume left the market in areas devastated by Katrina’s destruction, which once weighed down the city’s overall averages, he said. At the same time, the city’s more expensive neighborhoods have drawn a surge in interest, which has caused those prices to climb.
If that were factored out, Haase said, the 10-year figure would show “strong growth, but nowhere near 50 percent.”
Still, it’s clear that some buyers are engaged in bidding wars for properties in highly sought-after neighborhoods. “It’s very completive,” he said. “You can’t wait in today’s market or you’ll miss it.”
Follow Richard Thompson on Twitter, @rthompsonMSY.