After years of skyrocketing home prices, an oversupply of homes for sale in the New Orleans area -- nearing levels not seen since the oil bust -- is pushing overall prices down by thousands of dollars and all but erasing the giant gains in appreciation homeowners have seen during the past seven years.
On the east bank of New Orleans, there were 3,134 homes on the market through June 18, compared with 2,893 during the same time in 2006 and 2,073 in 2005.Sterbcow said there is a 14-month supply of homes priced between $350,000 to $400,000, meaning that the number of homes in that price range would take 14 months to sell out at the current pace. In a market where supply and demand are fairly balanced, there should be only a five-month inventory of homes for sale, he said.
New Orleans like many other metropolitan areas, across the US, are facing a declining housing market.
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There are no other major, prevailing factors affecting New Orleans at this time. Your grasp of the big picture is astute.
ReplyDeleteSurely post-Katrina, given the lackluster rebuilding effort, New Orleans isn't your average market?
ReplyDelete"A class of perpetual renters will have been created where its members can never work their way out of their condition." Lance June 23 2006
ReplyDeleteWASHINGTON (AP) -- Reflecting further housing troubles, sales of existing homes fell in May to the lowest level in four years while the median home price dropped for a record 10th consecutive month.
The National Association of Realtors reported Monday that sales of existing single-family homes and condominiums dropped by 0.3 percent to 5.99 million units in May, the slowest sales pace since June of 2003.
...
In a troubling sign for the future, the inventory of unsold homes rose by 5 percent to 4.43 million units in May, a level that would take 8.9 months to clear out at the May sales pace. That is the highest inventory level since the last deep slump in housing in 1992.
LOL, if only we all had Lance's crystal ball.
The numbers are out for May existing home sales. From WSJ OnLine:
ReplyDeleteExisting Home Sales, Prices Decline
By JEFF BATER
June 25, 2007 10:55 a.m.
WASHINGTON -- Existing-home sales dipped during May to their lowest level in nearly four years, while inventories climbed and prices fell a 10th straight time.
Home resales fell to a 5.99 million annual rate, a 0.3% decrease from April's revised 6.01 million annual pace, the National Association of Realtors said Monday. April's rate was originally estimated at 5.99 million.
The median home price was $223,700 in May, down 2.1% from $228,500 in May 2006. The median price in April this year was $219,800. The 2.1% drop marked the 10th consecutive year-over-year price decline.
The May resales level of 5.99 million was in line with Wall Street expectations. It was the lowest pace of demand since 5.94 million in June 2003.
NAR economist Lawrence Yun said would-be buyers appear to be waiting for more signs of stability. "The market is underperforming when you consider positive fundamentals such as the strength of job creation, economic growth, favorable mortgage interest rates and flat home prices," Mr. Yun said.
Some private analysts think the housing slump will keep restraining the economy. Builders broke ground in May at a lower rate than the month before, confirming their loss of confidence in a market bloated with inventory. The government reported last week May housing starts fell 2.1%, the first drop in four months. The lifeless housing market has reduced economic growth for six consecutive quarters, and a bulging supply of unsold homes suggest further drag. Another thorn in the side of the industry is the subprime loan market mess. Lenders have tightened credit -- and might do so further amid evidence that the outlook for securities backed by the riskiest subprime loans made last year has deteriorated.
The average 30-year mortgage rate was 6.26% in May, up from 6.18% in April, according to Freddie Mac.
Inventories of homes rose 5.0% at the end of May to 4.43 million available for sale, which represented an 8.9-month supply at the current sales pace. There was an 8.4-month supply at the end of April, which was unrevised from a previous estimate.
Regionally, existing-home sales were mixed. Sales rose 0.7% in the Midwest and 5.8% in the Northeast. Demand fell 0.8% in the West and 3.4% in the South.
Sad,
ReplyDeleteI would have thought the housing shortage would have kept prices up in New Orleans for another two years.
Hopefully we can reign in the construction and actually rebuild that city.
Obviously its an interesting factoid on a very unique market. None of us would even hint that its indicative of the national market.
But its certainly interesting.
Neil
"Surely post-Katrina, given the lackluster rebuilding effort, New Orleans isn't your average market? "
ReplyDeleteIt's idiotic to try to compare New Orleans to any other market. but that never stopped David before.
David, I think that was a bad post. Due to Katrina, N'awlins is not like any other market in the US - at least until a big one hits Miami.
ReplyDeleteAnonymous said...
ReplyDelete"It's idiotic to try to compare New Orleans to any other market. but that never stopped David before."
Anonymous said...
"David, I think that was a bad post. Due to Katrina, N'awlins is not like any other market in the US - at least until a big one hits Miami."
Somehow posting facts makes a post “bad”. Maybe a post on the Pairs Hilton interview would be more to their liking?
Excellent post David.
Housingtracker.net just posted its weekly update, and inventory jumped 19.5% in one week. From 33,671 to 40,222. That follows last week's jump of 11%. If you believe Housingtracker's numbers, we have gone from free fall, skipped over the blood bath, and are currently on the cusp of Armageddon.
ReplyDeleteAnyone care to defend Housingtracker's 30,280 number from 6/11/07 that supposedly showed inventory down YOY? Because it is now up 5.3% YOY, and up 40.8% over the last six months.
So much for the "bidding wars in May" theory. So much for the "we have finally hit the bottom" theory. So much for the "real estate never goes down" theory (see comment above about 10 consecutive decreases).
Go ahead. It's okay to say you were wrong.
Those who left New Orleans did so because:
ReplyDeleteThey have nothing to go back to
They saw their houses destroyed because they were about to collapse due to the storms destruction
They saw their houses demolished due to the flooding, mold, rats, etc.
Tehy decided that enough was enough and decided to live out their lives in a hurricane free area that Wasn't below sea level.
New Orleans, where the city is below sea level and the mortgaged home owners are under water, kind of ironic, isn't it?
Besides those who were born and raised in New Orleans, Who in their right minds would want to move there? (Besides flippers trying to make a fast buck?)
Also on Housing Tracker, prices have now declined to 425K, down from 475K a year ago.
ReplyDeleteInventory up, sales down, prices down. Game over for flippers and F'd borrowers, and they're the losers. Muhahahahahhahahaha
"NAR economist Lawrence Yun said would-be buyers appear to be waiting for more signs of stability. "The market is underperforming when you consider positive fundamentals such as the strength of job creation, economic growth, favorable mortgage interest rates and flat home prices," Mr. Yun said."
ReplyDeleteYada, yada, yada...
Buyers are waiting for lower real prices and better affordability.
But its not underperforming considering the still ridiculous prices.
His comments are disingenuous.
"Anyone care to defend Housingtracker's 30,280 number from 6/11/07 that supposedly showed inventory down YOY? "
ReplyDeleteAnyone with a clue knew that there was a problem with the data that week. (not that that stopped various people from trying to use it)
It looks like whatever the problem was it is now corrected because the latest inventory numbers fall in line with the trend we were seeing before the one anomalous blip.
It is worth noting that asking prices in the area are down ~10% YoY in the area... I suspect by fall we are going to see the bottom really fall out as sellers realize that their house/condo really isn't "priced right" in the midst of a bunch of other homes that aren't selling either.
Ok, so New Orleans is in a drastically different situation. Maybe that does or doesn't mean that "There is a housing bubble in the US." But, you can't discount the veracity of the article, can you? I mean, it's debateable that this is indicative of anything. There's fewer houses, and there's fewer people there. (And a lot of them aren't coming back anyway) So we really don't know. But there's not much point in jumping on David for even mentioning it.
ReplyDeleteInterstingly, New Orleans is not the anomoly one would expect. From today's WSJ:
ReplyDeleteGlut of Homes Puts Pressure on Prices; Inventory Rises 5%
By KELLY EVANS
June 26, 2007; Page A2
The number of homes on the market increased 5% in May, adding to a glut in many parts of the country and threatening to push prices lower as the housing market keeps tumbling.
The National Association of Realtors reported that the number of previously occupied houses and condominiums listed for sale rose to a total of 4.43 million last month from 4.22 million in April. The May total was enough to last 8.9 months at the current sales rate, the trade group said. That is the largest inventory buildup since 1992, during a previous housing slump.
Coldwell Banker's Jim Gillespie says luxury home owners are bullish.
Home sales fell 0.3% in May from a month earlier to a seasonally adjusted annual rate of 5.99 million, the lowest in four years and a 10.3% decline from a year earlier. The median home price in May fell to $223,700, down 2.1% from a year earlier.
"Though sales of existing homes fell only slightly in May, falling prices and record high inventories leave little doubt that the 'correction' in the housing market is nowhere near ending," David Resler, chief economist at Nomura Securities, wrote to clients.
The 5% increase in homes on the market was notable because inventories typically have been little changed in May during the past two decades, according to Credit Suisse Group. May is one of the busiest months for home sales because families with children usually want to move during the summer.
People trying to sell their homes face increasingly tough competition from homebuilders, which built aggressively over the past few years and are now slashing prices to entice buyers.
Rising inventories weigh on home prices. "If builders can be disciplined and cut back on production, then overall inventory would begin to diminish," said Lawrence Yun, a senior economist for the Realtors association.
URL for this article:
http://online.wsj.com/article/SB118277925445347058.html
worthy of its own thread
ReplyDeletePrices falling nationally.
"Boston, Detroit, Phoenix, San Diego and Washington, D.C., showed the greatest year-over-year declines in prices. Meanwhile, prices rose in Charlotte, N.C., Seattle and Portland, Ore., versus last year but those increases were moderating."
With DC hurting, certainly belongs on this blog.
http://biz.yahoo.com/ap/070626/home_price_index.html?.v=1
Got popcorn?
Neil
I used to sell real estate in NOLA until 2003.
ReplyDeleteFirst, $350K was an expensive home in NOLA pre-Katrina. Second, people are bailing on the city given the inexcusable incompetence the recovery's management by government officials at all levels.
It is by no means an omen of markets anywhere else in the country.
You really have to take this story in context. There are more high priced homes for sale here than there have been in the past. This is because more professional people are leaving new orleans due to lack of work. The pace of recovery has been very slow here. The market is bad, but for other reasons than the housing bubble.
ReplyDelete