After years of rising prices, David Devillier saw his chance to get in on New Orleans’ real estate boom when he bought and restored a nearly 160-year-old Greek Revival double-gallery house a block off St. Charles Avenue.
Devillier, who owns a construction company, bought the five-bedroom, 4½-bath house for $600,000, and he estimates he spent about the same amount on the renovations. “I bought it in really bad shape and basically totally rebuilt it,” he said.
But after the house sat on the market for six months, Devillier recently dropped the asking price to $1.3 million, essentially his break-even point, giving up on a once-anticipated $200,000 profit.
For all the focus on New Orleans’ red-hot real estate market — single-family home prices rose 8.6 percent in the first six months of 2018, compared with the same period a year earlier — high-end homes in the city's most desirable neighborhoods represent one slice of the market that is showing signs of softening.
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“You’ve definitely seen prices come down on the luxury market,” said Bryan Francher, a real estate agent with Gardner Realtors who listed Devillier’s property. “There’s just so much inventory.”
Far more properties are available than in years past. There were 203 homes for sale for at least $1 million in Orleans Parish in September, which was 70 percent more than five years ago, according to MLS data which track real-estate offerings.
More homes in the area may be worth $1 million now thanks in part to inflation and surging prices. But homes in that price range are also staying on the market for much longer. The city had nearly 25 months' worth of $1 million-plus homes inventory in September, up 20 percent from a year earlier and more than 90 percent higher than five years ago.
The number reflects how many houses are now topping the $1 million mark.
“There are quite a few things in that $1 million to $2 million range,” said William McIntyre, a real estate broker with Coldwell Banker. “People have options.”
Single-family homes across all price ranges are staying on the market for three to six months on average before finding a buyer — longer than what favors a seller but not long enough to tilt the scales heavily in a buyer's favor.
Single-family homes in New Orleans sold for an average of $354,962, or about $179 per square foot, from January through June, according to data from the New Orleans Metropolitan Association of Realtors and the Gulf South Real Estate Information Network. That was up from $165 per square foot in the first half of 2017.
Local real estate agents and others who follow the market point to several factors that may be contributing to the glut of luxury homes. For one thing, after years of rising prices that have lifted property values throughout the city, some homes that previously sold for under $1 million are now able to break through that mark.
After years of steady price increases, more single-family homes have been staying on the market lately in New Orleans for longer periods of time.
“It used to be that you’d look at over $1 million and you’d see five houses or six houses for sale in New Orleans. There must be 50 or 60 on any given day now,” said real estate consultant Wade Ragas, who has tracked the region’s housing market for decades. “There’s an enormously larger inventory.”
Those houses are also popping up in more neighborhoods than they once did, Ragas said, pointing to some pockets of the Garden District, Irish Channel and Uptown.
“If you have a 4,000-square-foot house,” he added, “you have a pretty good chance that it’s worth $1 million, depending on where it’s located Uptown.”
The expectation that the soft spot in the market for high-end homes is temporary may lead some sellers to hold their ground and wait for an offer that’s higher than what the current market dictates.
Homes tend to sell faster in the spring than the fall, real estate agents say. In March, the city had 209 single-family homes listed for $1 million or more, and properties sat on the market for just over a year on average.
However, a year earlier there were only 145 such properties listed, though they represented nearly 21 months of inventory.
“I still think our market’s moving. It’s just that we get spoiled because in the spring, it moves so much faster,” said Sissy Sullivan, an agent with RE/MAX.
In September, Sullivan listed a four-bedroom, 4½-bath single-family home a few blocks from Audubon Park for $1.3 million. The price has since dropped by $150,000.
“There’s no rhyme or reason with the market in New Orleans,” she said. “If I had the crystal ball, I’d be at the beach right now.”
Real estate is a cyclical business, most agents contend, and this latest lull will pass.
But across the market’s varied price points, many factors could be contributing to the higher housing inventory, such as concerns over the city's pothole-filled streets or its antiquated drainage system, which could send some buyers elsewhere, such as St. Tammany Parish, where they can typically find a bigger property for less money.
Rising interest rates for borrowers are likely less of a factor for high-end buyers. “If you can afford a $1 million home, you can pretty much ride out a rise in interest rates,” said Kelli Wright, an agent with Latter & Blum.
For his part, Devillier blames not only the market’s natural swings but also ongoing drainage work along Louisiana Avenue, which has made the area around his property difficult for potential buyers to navigate, although the long-running project is slated to wrap up soon.
“We knew the prices went up quickly, and it kept going up and going up. You know it’s going to plateau, but I was hoping I could get this sold before it started coming back down,” he said. “I mean, it’s expected that when it goes up that high, it can’t stay that high.”
Still, with the market tough to predict, Devillier is ready to cut his losses.
“It’s not happening anymore, so it’s time to move on,” he said.
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