Rising interest rates. Outrageous homeowner and flood insurance premiums. Inventory shortage. All of this adds up to a New Orleans real estate market that’s no fun right now.
No fun for buyers
Generally, home buyers in New Orleans have had an enjoyable time searching for a home. But that hasn’t been the case over the last couple of years. Historically low rates and a shortage of homes for sale combined to make multiple offers the norm, creating a stressful and disappointing experience for way too many of our buyers. Not everyone is willing or able to waive appraisals or pay over the asking price, so it’s been a lesson in frustration, particularly for those in the under $300k price range.
Now, as mortgage interest rates are on the rise and insurance costs have skyrocketed, some buyers are being forced to put their home search on hold because the price has become too much to pay. That’s not to say that renting is any better – 2022 median rents in New Orleans currently stand at $2,650, up from $2,500 in 2021.
No fun for sellers
Many sellers who opted not to put their homes on the market during the frenzy of the last couple of years were caught between a rock and a hard place. Selling at the height of the market also meant buying at the height, and many of them didn’t want to wade into that fray unless they had to.
While it has been really, really, REALLY easy to sell houses for the last 2.5 years, the market is shifting. Now is the time when sellers will have to take a better look at who they are hiring to market their homes. It’s no longer a matter of sticking a sign in the yard, holding one open house, and sorting through a pile of offers. Getting a home in front of the right buyers, presenting it beautifully, and knowing how to pinpoint the right price are all skills that experienced agents should have. Now is the time for sellers to do a little research on how an agent markets properties when they were easy to sell. If they took the path of least resistance and didn’t put in 100% effort, they sure aren’t going to spend the money on marketing when a sale isn’t a slam dunk.
Now, more than ever, sellers should be interviewing agents with a proven track record of accurate pricing and stellar property presentation and marketing.
Our predictions (today, anyway)
Rates will continue to go up, but we don’t think they will hit double digits as long as the Fed continues to do what it can to correct the market.
Insurance costs will continue to be a pain point. Sellers should be sure to keep their flood insurance active so that buyers can assume the existing policy, even though their rates will increase by up to 18% per year.
Buyers will likely have to search for lower-priced homes to offset the monthly payment increases caused by rising rates and insurance. Take the time to have a consultation with your agent so that you are both on the same page about your budget and pain points. Also, talk to your mortgage lender about whether an adjustable-rate mortgage can save you some money now and allow you to refinance when rates are more favorable. If you don’t plan to be in your home for longer than the initial ARM period, it might be a smart move.
Investors should be focused on affordable neighborhoods for flipping or hold-and-rent. There is a massive shortage of affordable properties that can qualify for FHA or VA financing and the folks with cash to rehab these homes can continue to sell them quickly.
Sellers will have to adjust to a softening market and not worry about what their neighbor sold their home for last year.
People will always need a place to live. Whether they choose to buy or rent, housing is a basic need. Life events will always have folks moving around and we will continue to be here to help you find the best path for your personal situation.
Need to connect with a New Orleans real estate market expert? We’ve got you covered. Call us today at 504-327-5303.
