Home prices are rising again in New Orleans after taking a dip last year, giving a boost to property owners but also likely intensifying the city's shortage of affordable housing.
The average price per square foot of a single-family home in Orleans Parish rose by 8.6 percent in the first six months of 2018 compared with the same period a year earlier, according to newly released figures — reversing a recent dip that analysts had described as inevitable following years of steady price increases.
Homes in New Orleans sold for an average of $354,962, or about $179 per square foot, from January through June, according to figures released last week by a local real estate trade association. That was up from $165 per square foot in the first half of 2017.
“The good news for Orleans Parish is that people who bought in the market over the last several years are still experiencing appreciation with what they bought,” said real estate consultant Wade Ragas, who compiled the numbers.
“The bad news,” he added, “is that the rising prices don’t do anything for affordability, and so we still have an affordability problem in Orleans, and it isn’t being cured.”
Across the eight-parish metro area — which includes Tangipahoa Parish — sale prices for single-family homes rose by 5.6 percent in the first half of 2018, reaching an average of $256,848, or $132 per square foot.
Prices in Tangipahoa saw the biggest jump — 14.1 percent — to an average of $186,700, or about $102 per square foot. The growth in sale prices in other suburban parishes was more modest.
And in Jefferson Parish, where prices saw the biggest year-over-year jump in 2017, the market has apparently cooled. Homes there sold for an average of $227,670, or about $125 per square foot, in the first half of 2018. That's compared to $226,302, or about $123 per square foot, a year ago.
Rounding out the metro area, St. Tammany Parish was up 3.1 percent, to about $122 per square foot; Plaquemines Parish had a 5.5 percent increase, averaging about $133 per square foot; St. John the Baptist Parish was up 3.8 percent, to about $96 per square foot; St. Bernard Parish was up 2.5 percent, to $97 per square foot; and St. Charles Parish was up 1 percent, averaging about $115 per square foot.
Ragas' analysis, which is based on data from the New Orleans Metropolitan Association of Realtors and the Gulf South Real Estate Information Network, does not include sales of multifamily homes, townhouses, condominiums or vacant lots.
However, for the first time, the data include sales of homes described as being in poor or fair condition, which typically have been placed in a separate category. The number of those properties — whose definition is fairly subjective — has dwindled since after Hurricane Katrina in 2005, leading Ragas to decide to lump such properties in with the rest of the mix.
Ragas speculated that Tangipahoa’s recent rise in prices was at least partly caused by home buyers who were drawn there by lower costs than in St. Tammany or the River Parishes. Despite having to grapple with a longer commute to jobs in the Hammond area, they can save money and typically get more land in Tangipahoa, he said.
“When you look at all the goodies it brings to the table, it’s one of the best deals in the market,” Ragas said.
In New Orleans, areas that saw the most sales activity in the first half of the year included parts of Gentilly and Lakeview. Areas that saw the largest price increases from last year included Algiers, where prices shot up nearly 30 percent in the 70114 ZIP code to an average of $134 per square foot — still nearly 25 percent less than the citywide average.
“More people who have been renting are pulling the trigger to finally buy,” said Kristin Lumpkin, a real estate agent with Keller Williams Realty.
The Mid-City ZIP code 70119, which includes the Bayou St. John and Fair Grounds neighborhoods, saw sales prices rise roughly 19 percent, to about $212 per square foot.
That area was already popular with renters, and some may have decided to take the plunge into home ownership, according to local real estate experts. The neighborhood has also enjoyed a boost thanks to recent retail growth and the completion of the Lafitte Greenway bike path and pedestrian park.
“Especially with Mid-City, I feel like there’s much more of an influx of younger families moving in,” said Lacey Merrick Conway, president of Latter & Blum. "It’s more affordable, the average price there is much more appealing, it’s community-oriented. You’re pretty much close to everything, and there’s a lot going on there.”
One category of buyers who seemingly have cooled to the local market is real estate investors looking to buy properties to list on short-term rental platforms like Airbnb, Lumpkin said — a trend that could be welcome news to some renters feeling squeezed by rising housing costs.
The likely explanation is that the City Council recently imposed a moratorium on new or renewed short-term rental licenses for owners who want to rent out entire homes in many of the city’s residential neighborhoods.
“Investors are getting a little gun-shy with pulling the trigger,” Lumpkin said.
Still, the city’s latest price increases represent a turnaround from a year ago, when sale prices in New Orleans fell by a few percentage points on average for the first time in eight years.
That likely spurred more would-be home buyers to enter the market and see what was available, Ragas said, especially amid rising concern about interest rate hikes by the Federal Reserve. Higher rates would raise interest costs for mortgage borrowers.
“People can complain about price,” he said, “but if you are able to pay the rental numbers, I think there’s a pretty good inventory available for them to look at.”