For the first time in eight years, home sale prices in New Orleans showed signs of cooling in the first half of 2017, actually dropping by a few percentage points on average — a development that some real estate experts reacted to with little surprise after years of steady price increases.
In fact, average prices per square foot in Orleans Parish fell by 3.5 percent in the first six months of 2017 compared with the same period a year ago.
Single-family homes in average or better condition sold for an average of $361,354, or about $179 per square foot, from January through June, according to the report. That was down from $185 per square foot in the first half of 2016.
For New Orleans, which has seen years of steady gains — so much so that low single-digit upticks were previously seen as signs of cooling — the recent dip could be the first since the 2008 financial crisis, when nearly every market faced declines, said Wade Ragas, a local real estate consultant who compiled the numbers.
Ragas described it as "an overdue adjustment" and summed up the situation that many would-be homebuyers and renters have found: "It's still a fairly expensive housing market in Orleans."
Overall, across the eight-parish metro area — which includes Tangipahoa Parish — sale prices for single-family homes in average or better condition rose by 2.3 percent in the first half of 2017, reaching an average of $251,135, or $129 per square foot.
The growth in sale prices in most suburban parishes contrasted with the decline in New Orleans itself, though prices overall are still much lower outside the city. In Jefferson Parish, sale prices rose about 9.9 percent, to an average of about $123 per square foot. St. John the Baptist Parish had a 2.8 percent increase, averaging about $93 per square foot.
Rounding out the metro area, St. Tammany Parish had a 2.3 percent increase, averaging about $119 per square foot; Plaquemines Parish was up 1.9 percent, to about $126 per square foot; St. Bernard Parish was up 1.7 percent, to $95 per square foot; and Tangipahoa was up less than 1 percent, averaging about $94 per square foot.
St. Charles Parish saw a slightly bigger decline for the six months than New Orleans. There, sale prices were down 3.6 percent, averaging about $108 per square foot.
Ragas noted a few factors that could explain New Orleans' declining sale prices.
The metro area added about 4,100 jobs — less than 1 percent — in the 12 months through June, according to preliminary figures. But some who track the region's economy, including Ragas, have expressed skepticism, predicting the number will later be revised downward.
"Everything that I'm hearing suggests that we've had a slowdown in employment growth here, and the culprit of that slowdown is mostly the oil and gas industry," Ragas said. "When employment growth slows, demand (for houses) slows. That's just how it works."
Additionally, the area's median household income has not kept pace with housing prices — which, despite the drop in the first half of this year, are up almost 8 percent in New Orleans since mid-2015.
"We've had this long run, and we've driven up prices to where they're really getting quite high in relation to people's income," Ragas said. "The way a market corrects that is the buyer stops paying full price and they start offering less, and then eventually enough of them do it that prices come down."
That's working in favor of suburbs like Jefferson Parish, Ragas said, since single-family homes there were $56 less expensive per square foot than in New Orleans. "It's a big gap," he noted.
Ragas' numbers come from the New Orleans Metropolitan Association of Realtors and the Gulf South Real Estate Information Network. The data do not include sales of multiple-family homes, townhouses, condominiums or vacant lots.
Despite the decline in prices, Rick Haase, president of New Orleans-based Latter & Blum, said he isn't sounding the alarm.
Haase doesn't put much stock in the percentage dip, instead stressing that median home sale prices in New Orleans rose about $18,000, to $213,000, in the first seven months of 2017.
He said it's the high end of the local market — homes selling in the neighborhood of $800,000 — that's started to "cool from super-heated to warm," pulling down the average price.
"The market is still moving forward," he said. "It's just moving forward at a slower rate."
But after some areas of New Orleans were inundated by floodwaters a week ago, for the second time in a few weeks, Haase said some buyers could hesitate about taking on a 30-year mortgage for a home in New Orleans if the drainage issues aren't soon resolved.
"The flooding and crime problems are going to drive people away from purchasing in Orleans Parish," said Haase, who also serves as vice chairman of the New Orleans Police and Justice Foundation. "It exacerbates an already existing problem of very low inventory in the affordable-price range."