The pandemic upended parts of the New Orleans area housing market last year, but not in the ways many homeowners and real estate specialists expected.
The number of homes for sale tumbled, while the number of transactions soared. Prices jumped in some hot neighborhoods, while other areas with surging prices quickly cooled. The suburbs saw lots of activity as remote workers sought more space, but owners of short-term rentals didn’t throw in the towel and sell. And a deepening mortgage crisis, one that has left 1 in 10 local homeowners struggling to keep up with payments, hasn’t yet resulted in defaults and foreclosures.
Overall, the median sale price rose 7.1% across the 10-parish New Orleans metro area in 2020, according to data released last week by the New Orleans Metropolitan Association of Realtors. In Orleans Parish the increase was 6.1% to $302,500. Jefferson Parish saw a median increase of 9.2% to $225,000, while St. Tammany prices rose by 7% to $243,500.
For many homebuyers, the most surprising thing about the pandemic market was the steep increase in transactions amid a slump in supply. That meant lots of activity around any homes that did make it on to the market.
It was a trend in the city and the suburbs, including in St. Bernard Parish, where first-time homebuyers Danielle and Alexandra “Allie” Martin said the onset of the coronavirus pandemic in the spring of 2020 made their already difficult, year-long search for an affordable property even more complicated.
Danielle, 31, and Allie, 29, thought the economic uncertainty triggered by the stay-at-home orders and other measures to curb the spread of the virus would lead more people to sell their properties at lower prices. But it didn’t work out that way.
“I wouldn’t want to wish misfortune on anyone, but at the beginning of the pandemic we were thinking it might be like the crash in 2008 and there might be people selling their Airbnb properties or vacation homes and we might catch a break,” said Danielle Martin, who left her job at the St. Bernard Economic Development Foundation to join Tulane University, where she is completing an MBA at evening classes. “But honestly we all know at this point that is not what happened.”
When a duplex within their price range came on the market in November, it had multiple offers within 48 hours, Danielle Martin said. The house on Community Street in Arabi, near the New Orleans line, was priced slightly more than $200,000. Half the duplex, which has about 1,000 square feet on either side, was already rented to a young couple and their daughter.
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The Martins lost out to another buyer initially, but he backed out at the last minute. They were successful in an auction, bidding $210,000. They closed on the house earlier this month, on the date of their second wedding anniversary, having spent most of their married life house hunting.
St. Bernard Parish saw the second-highest jump in sales volume last year, up more than 24% at 525 transactions. That was just behind Plaquemines Parish, up almost 25% at 181.
Last year a record 15,537 residential properties were sold across the region’s 10 parishes, 7.1% more than the previous year. There was also a sharp drop in the number of homes listed for sale: At slightly less than 20,000 for the whole year, it was down more than 8% from 2019.
By December there were only about 2,600 properties available for sale, down a record 44% year-on-year, according to data from the Gulf South Real Estate Information Network. The data included transaction information for single-family homes, townhouses and condominiums – but did not include prices per square foot.
The odd situation – record sales and a record drop in properties available – reflects the unprecedented uncertainty in the market last year.
“When everything first happened and things were shutting down, we didn’t know what the future held,” said Liz Tardo, a veteran real estate broker who started her own firm, NOLA Home Realty Group, just before the pandemic hit.
As it happened, she sold 58 properties in 2020 – the most she has ever sold in a year. Many buyers were looking for more space, and were willing to change locations because they expected to be working more from home instead of commuting, even after the pandemic lifts.
“One of the main reasons I sold a listing right when the pandemic hit was I advertised it as the perfect work-from-home space,” Tardo said.
The trends in the New Orleans metro area have reflected what’s been going on nationally. The National Association of Realtors reported earlier this month that existing home sales surged by 5.6% last year, to 5.6 million – their highest level in 14 years.
Real estate brokers around the country have been saying for months that the push for more residential space, driven by the trend toward more working from home, has been driving much of the sales.
For the Martins and other New Orleans area buyers, that meant they often faced frenzied competition for desirable properties.
Most sales in the metro area were accounted for by the three most populous parishes: Jefferson, Orleans and St. Tammany. The move to the North Shore kept pace last year, with St. Tammany sales volume up by more than 15% to 4,907 properties sold.
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But within all of the parishes, there were wide discrepancies between zip codes. Prices in more affluent areas, such as Uptown New Orleans, Old Metairie and The Sanctuary subdivision in Mandeville, set new records for individual listings.
But other areas saw sagging prices. The biggest declines were in the areas around Garyville and Paradis.
One of the main drivers pushing prices up in some areas – record low mortgage rates – wasn’t available to some lower-income buyers last year. Hung Le, a mortgage consultant at Movement Mortgage in Metairie, said that drop in mortgage rates to about 2.75% last year, from closer to 5% before the pandemic, was a great boon to those with financial means.
“It’s meant more buying power,” Le said. “Someone who could afford a $200,000 house a year ago can now can go to $250,000 for the same [monthly mortgage] payment.”
But he also said that both private lenders and the federal housing agencies, which back about two thirds of the mortgages in the United States, tightened their lending criteria in 2020. From early on in the pandemic, they all required higher credit scores, and the federal agencies tightened their requirements on employment documentation.
“Part of the problem with the lower-end homes is getting approval for the financing,” said Anne Comarda, president of the New Orleans Metropolitan Association of Realtors and a broker at Engel & Völkers.
At a time when New Orleans leads the country as the city with the highest rate of mortgage delinquency, the working class areas of the city are falling further behind in terms of property valuation.
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But the record low mortgage rates has meant that people with more to spend on a home, such as Samantha Davidson, 31, and her fiancé, Brent Allen, 34, an emergency room doctor, can go from renting straight to a house where they plan to start a family.
Davidson said they faced a similar situation to the Martins, in that whenever they had found properties where they wanted to buy – Lakeview in New Orleans, mainly for proximity to the Edward Hynes Charter School – those houses were snapped up within a day or so of hitting the market.
They finally found a house on General Haig Street, two blocks from the school. But it was badly in need of an upgrade.
“Brent will take a coding patient over renovations, but I’ve flipped some houses with my dad [a Baton Rouge property developer], so changing counters and floors and doing some painting and decorating wasn’t scary to me,” Davidson said.
One formerly hot area that took a tumble in 2020 were condominiums in New Orleans’ oversupplied Warehouse District.
In 2018, Brandon Pellegrin and his wife, Jiwon Hwang, both of whom work in oil services, bought a newly constructed one-bedroom condo in The Standard at South Market. It’s one of the priciest developments in area; Saints defensive end Cameron Jordan bought a three-bedroom unit there for almost $1.5 million.
When the couple first bought, the one-bed units with about 1,000 square feet of space were going for $600,000 to $700,000, depending on the floor, Pellegrin said. But a year later the larger two-bedroom units, with about 1,400 square feet, had dropped from more than $1 million to below that. So Pellegrin negotiated with the developer, The Domain Companies, to convert his first condo to a rental and upgraded to the two-bed. Now, with the market softer still, he’s considering negotiating a move into a top-end three-bed unit.
“You’re looking at a good $200,000 drop” in the prices of larger units over the past two years, said Pellegrin, who has closely tracked the asking prices of units in the building over the past two years.
As well as lower condo prices, the record-low financing costs for people such as Pellegrin and Hwang could mean monthly mortgage savings for them of more than $600.
Shaun Talbot, a real estate broker who specializes in the condo market, said the Warehouse District has been hit by a double whammy. Young professional buyers who’d been drawn the area by the “live-work-play” appeal of having proximity to their downtown office, as well as all the restaurants and entertainment venues, suddenly find they don’t need to go to the office and that the night life hardly exists.
Meanwhile, the second-home buyers who wanted to have a pied-à-terre for similar reasons, and to come into town for New Orleans Saints or Pelicans games, find the same thing.
“If you find that all those things are not happening, it puts a pause on the market,” Talbot said.