New Orleans home sellers high and dry
NEW ORLEANS — In working-class areas here, homes for sale have begun to move briskly. But in the ritzy Uptown district and other well-to-do neighborhoods, the picture is bleaker. “New Price” and “Reduced” signs adjoin grand Victorian homes — symbols of a struggling upscale housing market.
They’re the lingering effects of Hurricane Katrina. In coastal Louisiana and Mississippi, a glut of higher-end homes points to soaring property insurance costs that are pricing many people out of the market. It also speaks to the legions of doctors and other professionals who have left the area and have yet to return. The price of their exodus could be severe: Economic development experts warn that if these professionals stay away en masse, it could cripple the region’s recovery.
For anyone with a stake in the region’s recovery, the loss of higher-income residents — and the job skills they bring — is alarming. The problem is compounded by the shortage of upper-income buyers willing to put down stakes to replace those who have left.
Doctors, bankers and other professionals are “the backbone of the community,” said William H. Frey, a demographer at the Brookings Institution, a Washington think tank. “They’re the people who will help the tax base. If they leave, they are going to be very hard to replace.”
In New Orleans, sellers have begun dangling unusual sweeteners — in some cases, a year’s worth of home insurance premiums and state grant money — to draw buyers. Insurance rates, which have as much as tripled since Katrina, are deflating sales and forcing some to downsize to smaller homes.
“Insurance has never been the type of thing that would make or break the decision (to buy a house), but now it is,” said Peter Ricchiuti, a former assistant Louisiana state treasurer who teaches at Tulane University’s business school.
In a healthy real estate environment here, an average supply of homes for sale might be five months’ worth — basically how long it would take to clear that inventory, said Arthur Sterbcow, president of Latter & Blum, a major real estate agency on the Gulf Coast. Now, the New Orleans metro area contains nearly twice that supply of homes for sale.
The costlier the homes, the thicker the glut. The area includes a 10-month inventory of homes priced from $300,000 to $325,000. That compares with a 23-month supply of homes priced from $750,000 to $1 million.
“There are more homes on the market now than when there was an oil bust,” Sterbcow said.
Throughout the United States, home sales have fizzled as interest rates have risen and buyers who are jittery, cash-poor or hampered by shaky credit have been locked out. The U.S. supply of homes is at a 16-year high, affecting those in all prices ranges, the National Association of Realtors said. But in large part because of Katrina, the biggest glut of homes in New Orleans and along the Mississippi coast is among higher-end properties.