Although 2021 threw many of us for some loops, it was also one of the top-performing years the Louisiana real estate market has experienced in over 15 years. The pandemic resulted in an uptick in how individuals view their homes, with many of us stuck inside staring at the same walls for nearly two years now, it is no surprise people have more motivation to move and improve. What started in June of 2020 has turned into months of consecutive growth for the Louisiana real estate market, with no expectation for the growth to stop. 

Evaluating Performance 

Amidst the year of chaos, the housing market still managed to make history. Winter months are generally when market activity slows, but the past three months have been consecutively positive and are on track to set records for existing home prices. 

The first and most important factor behind the metrics of growth is the lack of inventory. This is initiating a nationwide increase in sales prices and growth in home value. From November 2020 to November 2021, national home prices increased by an average of 18.1%; with Arizona and other fast-growing states showing the strongest price appreciation. In Louisiana, the average sales price increased by 13.3%, for an average of $338,164. 

New Orleans Metro Average Sales Price Dec 2021

The lack of inventory nationwide is initiating positive sales price and home value growth. Technically this makes it a sellers’ market, meaning you’ll likely sell your home for at or above the list price. But as a buyer, this means the market is active, and although purchasing a listing may be more competitive there is a strong likelihood that the value of the property will increase in the near future. Mortgage rates are still low and attractive, creating a safe environment for the first-time homeowner or investor. 

Loans, Mortgages, and Financial Health 

The increase in home prices was fueled by low mortgage rates, which experts suggest will continue in the coming year, but at a lower intensity than what was experienced in 2021. Trends of high buyer demand and inventory shortages are expected to remain thanks to the pent-up pandemic demand. As people feel more and more ready to return to the new normal, this entails more activity in the housing market, but at a slowing rate compared to when health and safety restrictions were first lessened. 

Mortgage rates are determined by a number of factors, some of which are out of the individual’s control. Credit score and loan-to-value ratio are the two factors with the most influence, while others such as inflation and national economic environment. In the past decade, the US average rate has not exceeded a historical low of 5%, usually near or below 3.84%; comparable to the nearly 6% average for the decade ending in June 2011. 

Affordability and What This Means to the Homeowner 

Housing Affordability Index: This index measures housing affordability for the region. For example, an index of 120 means the median household income is 120% of what is necessary to qualify for the median-priced home under prevailing interest rates. Or another example, an index of 90 means the median household income is only 90% of what is necessary for the median-priced home in a given region. A higher number means greater affordability.

In December 2020 this score was 146 in Louisiana, an increase of +8.1% from 2019. In December 2021 this fell -7.5% to reach a score of 135. Prior to the pandemic, in December 2019, this score was also 135. This change entails that although affordability declined, the price of homes increased and the market appears to be returning to more normal activity levels. With the ongoing decline in inventory, available home prices will continue to increase, potentially lowering affordability if the regional economy does not grow at the same rate. 

For the homeowner, or those looking to buy or invest, now is a great time. In Louisiana on average homes are only on the market for 38 days, and median sales prices increased by 8.8% from $239,000 to $260,000. The number of new listings in the area fell 10.7%, pending sales increased by 5.5%, and inventory fell by 40.8%. It is safe to say that the Louisiana housing market is healthy and active, with signs of continued positive gains for homeowners and investors. 

References

https://audubonrealty.com/ 

https://gsrein-public.stats.showingtime.com/docs/mmi/2021-12/x/report?src=page 

Housing Affordability Index: This index measures housing affordability for the region. For example, an index of 120 means the median household income is 120% of what is necessary to qualify for the median-priced home under prevailing interest rates. A higher number means greater affordability.

In December 2020 this score was 146, an increase of +8.1% from 2019. In December 2021 this fell -7.5% to reach a score of 135. 

https://www.corelogic.com/intelligence/buy-stories/annual-u-s-home-price-hits-new-record-in-november/