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Rising and falling home prices follow flood pattern
March 2006


Editor's Note: This is the first of a nine-part series dissecting the New Orleans real estate market. The complete overview and breakdown of the market will appear in a special Homebuyer's Guide insert in the April 3 edition of New Orleans CityBusiness.

 

NEW ORLEANS - Hot and cold is the best way to describe the metropolitan New Orleans area real estate market.

Areas that were high and dry during last year’s historic hurricane seasons are, for the most part, experiencing price increases and booming sales activity.

 

The picture is much grimmer, though, for areas that were sacked by flooding.

 

Those harder-hit areas are seeing barely any sales activity, and prices are in the basement. The exception to the rule, though, is Lakeview, which some experts say is experiencing sales at near pre-Hurricane Katrina prices despite it suffering some of the worst flooding in the city.

 

"We’re starting to sell some properties in Lakeview but at numbers that are surprisingly high for land value. I don’t think the land value has really changed at all, which is a bit of a surprise," said Arthur Sterbcow, president of Latter & Blum Cos.

More homes are for sale in some areas now than before Katrina.

 

In Algiers, 371 single-family homes were listed for sale in the six months since Katrina compared with 289 in the six months before the storm, according to the Gulf South Real Estate Information Network Inc.

 

In the western portion of St. Tammany Parish, 1,063 single-family homes were for sale in the six months after Katrina, up from 813 during the six months before Katrina.

 

Figures from the six months before Katrina and the six months following Katrina also offer a good look at how prices have changed. The average price for a three-bedroom home on the West Bank of Jefferson Parish has increased nearly 10 percent from $124,895 to $137,082. But those prices don’t even come close to the boom in St. Charles Parish.

 

In the western part of St. Charles, the average price of a three-bedroom home is up 84 percent from $131,734 to $242,669.

Low to moderately priced homes in areas that did not flood are experiencing 10 percent to 20 percent price increases, Sterbcow said.

 

Luxury homes — those that sell for $400,000 or more — are seeing smaller price increases, he said.

Confidence in Lakeview

By contrast, in St. Bernard Parish, which suffered severe damage from flooding and the Murphy Oil spill, the average price for the same type of home has been chopped 54 percent from $112,547 to $51,750.

 

Howard Leach III, president of Delta Title Corp., a Metairie-based real estate transaction and title company, said only 10 Realtor-listed properties have sold in St. Bernard Parish since Katrina.

 

"People are selling as is and getting what they can, mostly pre-Katrina lot value," Leach said. "But there is little direction from the government for what people need to do out there."

 

Questions about future flood protection systems and the rebuilding of infrastructure as well as insurance issues are slowing real estate activity in eastern New Orleans, St. Bernard Parish and other severely flooded areas, Sterbcow said.

Despite the cloud that hangs over the head of heavily flooded areas, real estate companies are reporting strong prices in Lakeview, which was hit with 10 or more feet of flooding in some areas.

 

Rick Haase, general manager of Prudential Gardner Realtors, said gutted homes in Lakeview are selling for 60 percent to 65 percent of their pre-Katrina value on average. Lakeview homes that haven’t been gutted are selling for 40 percent to 45 percent their pre-Katrina value.

 

In St. Bernard, a gutted home might sell for 50 percent its pre-Katrina value, he said. "That 10 to 15 percent difference between Lakeview and St. Bernard becomes a function of how confident is the buyer going to be that the value will return to pre-Katrina levels."

 

Sterbcow said people seem to be confident that Lakeview will be better protected during future hurricane seasons. The proposal to build floodgates at the foot of the 17th Street Canal makes people feel safer living in Lakeview, he said, adding there is not a comparable feeling of security in eastern New Orleans.

High and dry

Homes are also up for sale in parts of the city that didn’t flood, such as Uptown. Haase said some of those sales could be due to people who were thinking even before Katrina of selling their home in the next one to three years.

 

"This is a heck of a good time to do it. The more homes put up for sale, the more the supply goes up, which represses overly rapid appreciation," he said. "I was asked the other night at a home buying and selling seminar, ‘What would you do if you were in the marketplace? Would you buy now or wait?’ I said ‘I would buy now.’"

 

Paul Boudreaux, Metairie branch manager of Delta Title Corp., said "For Sale by Owner" transactions are up in the first two months of 2006 compared to the same period in 2005. Delta Title averages about 250 transactions a month.

 

In the first two months of 2006, 40 percent have been FSBO, while in the first two months of 2005, FSBOs made up 17 percent.

Full sale transactions with Realtors have gone up from 24 percent to 31 percent.

 

"Many people who have sustained damage are trying to sell their houses by themselves," Boudreaux said. "If their houses flooded or they received substantial roof damage, they are likely to receive their insurance checks and sell the shell.

 

"Lenders and insurance companies are usually unwilling to enter the picture unless a damaged house is completely gutted."

 

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