Typically fall is not a busy time for home buying and selling, but that certainly was not the case for December’s Lafayette Parish home sales.
The 430 transactions reported not only set a record for the month but also for any month, according to our data that tracks Lafayette Parish monthly home sales going back 20 years. It was a fitting way to cap a year that in so many ways was anything but typical.
For the year, the 6,177 regional home sales reported to the Realtor Association of Acadiana’s Multiple Listing Service (MLS) crushed 2019’s record 5,595 sales by over 10%, and the $1.3 billion in volume exceeded the previous year’s $1.1 billion by 21%.
Lafayette Parish, which lagged behind the growth rate of outlying parishes over the past several years, was the catalyst for last year’s explosive regional growth. Its reported sales grew by 18.7% over the previous year and by over 27% in dollar volume to $977.4 million from $768.7 million.
Sales in the surrounding parishes declined overall by 2.5% but increased by 6.7% in dollar volume. The annual totals for both the region as well as Lafayette Parish smashed previous records for sales and dollar volume.
Lafayette Parish’s stellar numbers were broad-based. There were 3,077 sales of existing homes reported in 2020, up 14.3% from the 2,696 reported in 2019. New construction sales soared with 967 sales reported as compared to 710 reported in 2019, a 36.2% increase.
The dollar volume of existing homes sold for the year totaled $730.1 million and the new construction dollar volume was $247.3 million, an increase over the previous year of 27% and 27.5%, respectively.
Sales under $150,000 fell 8.8% from the year before while home sales of $150,000-$299,999 grew by 24.9% and sales above $300,000 rose by 33.6%.
The number of active listings as of Dec. 31 in Lafayette Parish in all price ranges fell to just 680. That number was 1,278 on Dec. 31, 2019, a decline of 47%.
What do all these numbers tell us about 2020 and, more importantly, about what we might expect in 2021?
Although trying to predict the future in these unpredictable times is fraught with peril, here’s what my cloudy crystal ball is telling me:
- The fuel that typically powers an expanding real estate market is the overall economy. When a region’s economy is experiencing positive growth, the local real estate market typically mirrors that growth. This past year was an exception. Due to the COVID-19 pandemic and the business shutdowns and shut-ins it caused, there was no rising economic tide lifting all boats this past year. What fueled the real estate boom throughout our country in 2020 was historic low mortgage interest rates.
With 30-year rates approaching 2.25%, a potential home buyer’s purchasing power increased by as much as 12% over the past year alone. That means what one would pay monthly on a $250,000 loan would now be essentially the same on a $280,000 loan. This is a direct result of the Federal Reserve’s Easy-Money Policy. Looking forward to 2021, all indications are that policy will continue until the Fed sees “substantial further progress” in the job market.
- According to Gary Wagner, economics professor at the University of Louisiana at Lafayette, the Lafayette region has lost some 8,000 jobs since February, but he predicts those jobs should be recovered by early 2022. More importantly, he noted that “higher-income earners, $60,000 and up” have seen their employment numbers fall by only 1% while “individuals earning less that $27,000 per year” have suffered a 20% drop in employment. The majority of potential home buyers would fall into the $60,000 and up earnings bracket. As such, demand in 2021 should remain strong.
- Supply of adequate housing is a more problematic issue. In 2020 new listings of existing homes fell by over 8%, but new construction homes coming on the market increased by nearly 46%. I predict that new home construction will continue to be strong in 2021, perhaps approaching the 1,358 high of new listings notched in 2014.
- A short-term indicator of future sales performance is the number of contracts currently being negotiated. It typically takes 45-60 days for a transaction to be completed from the time the purchase agreement is formed. The pending sales numbers reported for November and December in Lafayette Parish have outpaced those reported for the same period the year before by 36%. That’s a positive indicator of closed sale increases we can expect going forward ahead at least through February.
So many unknowns and variables remain that might impact our national and local economy, including our housing market in 2021. But after all of the calamities of 2020, looking forward I prefer to embrace the adage that no one ever injured their eyesight by looking on the bright side.