Housing prices fall across New Orleans metro area as market activity slows to a trickle

When David LeBoeuf listed his Gentilly house for sale in May, he thought the newly renovated, two-bedroom cottage would move quickly with a price tag of $315,000, or roughly $190 per square foot.

But three months later, LeBoeuf has lowered his asking price to $285,000 and still hasn't gotten a single offer.

"I've been really surprised by the lack of interest," he said. "The lack of activity is so concerning."

LeBoeuf's experience is not unique midway through 2023, which is shaping up to be the worst year for residential real estate in New Orleans in more than a decade. After gradually cooling throughout 2022, the COVID-era housing boom that launched bidding wars among buyers and fostered unrealistic expectations among sellers has come to a screeching halt.

For the first six months of the year, the median sale price of a single-family home was down 3.6% across the nine-parish metro region compared to the same period in 2022, according to the New Orleans Metropolitan Association of Realtors. In Orleans and Jefferson parishes, the declines were nearly twice that steep.

During the same period, homes spent more time listed for sale — 50 days on average compared to 30 — and the volume of sales declined 25%.

The reasons for the slowdown have been well documented. Higher interest rates have cut buyer's borrowing power in half over the past year and homeowners insurance premiums have skyrocketed since dozens of insurers stopped writing policies in the state.

Together, those factors have priced many buyers out of the market. Agents and lenders are watching helplessly as buyers and sellers sit on the sidelines and try to wait out the current slump, which no one predicts will end until the insurance crisis eases up.

"It's very frustrating to go from getting multiple offers within hours of listing a house to sitting on the market for 60, 90, 120 days," said LeBoeuf's real estate agent Michael Lester, with Forte Realty. "And you can't bring the price down low enough to even get an offer because the buyer pool has been cut by two-thirds."

Return to normalcy?

While the median sale price across the metro area was down 3.6% for the first half of the year, the declines were steeper in some parishes than in others. Orleans Parish saw its median sale price drop 6% from nearly $370,000 to $347,000. Jefferson Parish sales prices were off nearly 5.5%, from $266,500 to $252,000. In St. Bernard, prices fell more than 13%, from $264,000 to $229,000.

Of the nine parishes in the metro area, only two were up — St. Tammany Parish, which saw a 3% increase, from $289,000 to $290,000, and St. John the Baptist Parish, where prices increased 13% from $168,000 to $190,000.

Veteran real estate agents say St. Tammany Parish continues to be desirable because of its public school system, relatively low crime rate, and because it's more affordable to buy homeowners and flood insurance north of Interstate 12.

In St. John, the increase was more of an anomaly. That area was hard hit by Hurricane Ida in 2021, which depressed prices throughout 2022, brokers say. Now, most of the damaged homes have been purchased and recent sales reflect newly renovated properties, which has artificially inflated the market.

"If you took the renovated properties out of the mix, our numbers would be as bad as everyone else's," said Robin Franks, a LaPlace-based broker at First Source Realty. "Houses are just sitting."

A couple of other caveats are worth noting. Though the median sale price metro-wide at $270,000 is down from its peak of $280,000 a year ago, it's still above where it was before the pandemic-fueled frenzy.

"Sellers are freaking out a little bit because everybody has a short memory and all they know is what their friends told them about how fast their homes sold last year," said Scott Brannon, a Realtor with Latter and Blum. "But, really, we're back where we were before COVID."

Also significant, even though sale prices in Orleans and Jefferson parishes are down overall, is that certain already pricey ZIP codes are bucking the trend. Prices were up in the CBD, French Quarter, Marigny and the University area Uptown. Old Metairie also showed a slight increase.

"Renovated houses in desirable neighborhoods are still flying off the market if they're well priced," said broker Craig Mirambell, of Mirambell Realty.

Insurance crisis

If you look at a graph of single-family home sale prices in the metro area over the past 20 years, you'll see a line that, like the stock market, jags up and down as it continues to gradually head north. In that respect, the current downturn appears as merely a blip.

What's different and concerning this time, experts say, is that the single biggest factor driving prices down and stalling activity is the cost of homeowners insurance, which is proving an elusive problem to solve. Since back-to-back hurricanes slammed into Louisiana in 2020 and 2021, more than a dozen insurance companies have gone belly up. Others have stopped writing policies in the state altogether.

Louisiana is not alone. State Farm and Allstate have stopped writing new policies in California, which is already too expensive for many potential buyers.

Closer to home, Farmers Insurance stopped renewing some of its policies in Florida, where more than a dozen insurers have pulled out of the high-risk market. There, as in Louisiana, the crisis is making homeownership unaffordable for many would-be buyers.

"The rate increases have been unbelievable this year," said Roxana Campos, a real estate agent, who recently moved from Jefferson Parish to Jacksonville, Florida. "The insurers won't write a policy for any property built before 2010."

Policymakers have tried to incentivize companies to write new policies. Louisiana set aside $42 million it will pay to insurers if they agree to take on new customers. Brokers say it's helping a handful of buyers but isn't making a significant difference.

What will move the needle is a quiet hurricane season, experts say.

"If it's a clear hurricane season, all will be well," predicts Chris Dorion, with Berkshire Hathaway. "But we need the good fortune we had last year — and not just here, but all the way to Florida."

Drowning in expenses

In the meantime, homeowners who might otherwise be trying to sell are taking down their for-sale signs for now, and when possible, are offering their properties for lease instead. During the first half of the year, nearly 1,140 single-family homes across the nine-parish region were withdrawn from the Multiple Listing Service, more than twice as many as in the first half of 2022.

"If it's an option, people are trying to rent their houses," said Franks. "They're carrying the note so why not generate income to cover some of those costs?"

LeBoeuf, who bought his Gentilly house as an investment property to begin with, says he'll take that route if he doesn't get an offer close to his asking price.

"For me, it might make more sense to rent it and try to sell for the original asking price later," he said. "Because right now, it's drowning me."