Earlier this year, Courtney Laticar, who lives in Gentilly, was excited that she and her two teenage daughters, who live in a rented house near Milberg, could soon settle in their house.
She secured a mortgage lender, enrolled in a program for first-time buyers, and pre-qualified for a loan. She found three bedrooms near Hayne Boulevard in New Orleans East with the features she wanted, including a good closet.
After that, big shoes fell. “Her insurance prices have skyrocketed,” she said.
Her target home was in a low-risk area of floods, but Latika’s buying efforts caught on FEMA’s new flood insurance pricing system, which raised her expected premiums and her total cost to the lender. It exceeded the allowed amount.
“The rising costs have knocked me out,” Latiker said.
Local agents say multiple issues are threatening to cool the hot home market when the most obvious challenge for homebuyers in the New Orleans region may seem to be rising mortgage rates. increase.
Mortgage rates have skyrocketed, but so have homeowners and flood insurance costs in many regions. At the same time, inflation is eating nest eggs. Anyway, it became what an agent called a nightmare situation for a local residential real estate.
“We are hit from all directions,” said realtor Brian Jardine.
The latest figures from the Gulf South Real Estate Information Network, which tracks local home sales, show that homes were sold fairly rapidly in the metropolitan area of 10 parish in May, with homes withdrawing from the market in an average of 25 days from 35 days. I showed that. The day of the same month a year ago. By the end of May this year, the median selling price was $ 278,000, about 9% higher than last year.
However, the report does not cover June, when the Federal Reserve’s increase in 75 basis points spurred higher mortgage rates. And one monthly data provides a warning sign. The number of closings in May decreased by 7.4% year-on-year, and the number of closings so far has decreased by more than 8%.
Meanwhile, market watchers say some of the housing sector is already starting to cool.
David Fabret, chairman of the New Orleans Metropolitan Real Estate Agents Association, predicts that higher mortgage rates can “potentially shrink” the market. So far, the price impact has been limited and he expects a “soft landing”. But he expects the high-end housing market to be the first to feel the impact of rising mortgage rates.
“Housing prices above $ 800,000 are starting to soften, so we expect to see the first impact in the luxury market,” he said.
New Orleans agent Jourdain, who recently sold some real estate in Slidell, said insurance costs would be breathtaking if rising borrowing rates were straining buyers.
Since 2020, four hurricanes have landed in Louisiana, with more than 500,000 claims. Fallout has put more financial pressure on insurers to cover losses. Seven policy-makers in the state went bankrupt, about 12 others withdrew from the state, fewer potential homeowners had options, and premiums soared.
In addition, more than 13,000 people have moved to the role of Louisiana Municipal Insurance Company. The Louisiana Citizens Insurance Company is a state insurer as a last resort to charge more than the coverage of the private market.
“I just got a client to get a $ 10,000 quote for homeowners insurance,” Jourdain said. Before his client made an offer to the subject’s house, Jourdain met with an existing owner and learned that they were paying $ 2,800 a year for compensation.
“I knew the buyer would have to pay more, but I thought the premium would be about $ 5,000,” he said. “$ 10,000 is ridiculous.”
For buyers who can afford such a surprise, the cost surge will probably not come between them and their new home. But for first-time buyers, like Latiker, who have to rely on a loan to close a transaction, such an unexpected increase in cost can kill the transaction.
Price goes up
Jourdain said interest rates rose too rapidly, acknowledging that higher interest rates would probably be needed to combat inflation. “It wasn’t long ago that some of my clients were able to get a 2.5 percent mortgage rate, and now having interest rates in the 6 percent range is just too fast,” he said. Said. “We actually had to requalify some of our clients (for mortgages) because new interest rates pushed them out of what they could pay.”
Agents recognize that past low interest rates cannot last indefinitely, but both buyers and sellers need a measure of predictability that is lacking in the current market. ..
“If you know where the system is heading, you can operate it, but if the price goes up significantly, it will hurt people in many ways, not just buying a home,” said a Latter & Blum realtor. One Jim Kerrin said. New Orleans.
Kerin points out that food, transportation and service costs are higher for everyone due to rising inflation.
In addition, many Louisiana residents will soon face higher electricity prices due to the recent increase in prices by Entertainment Louisiana. Also, homeowners in the Parish of Orleans may have higher property taxes as last year’s hurricane Ida-related one-year tax cuts expired and many homes reverted to pre-Ida valuations.
Tough for first-timers
Bonnie Brass, a Berchas-based agent who calls the triple mortgage rate, flood insurance and homeowner coverage a “nightmare,” says buyers who really want to move are finding a way to do so. Stated.
She wrote six different offers, but refers to a couple who worked together who couldn’t get a home because the offer had to assume that they would sell an existing home. I am.
“They finally sold their house and moved with their son,” Brass said. “Then they were able to make a full cash offer with a new purchase, and we got them a home.”
But for buyers who don’t own a home yet, the situation can be even more difficult. Kerin said buying a double is a good way to get into the market, as first-time buyers can live on one side of the house and use rental income from the other side to cover their monthly notes. He said he realized it was a way. ..
“Last year, people were doing it crazy,” he said. “But now, (interest rates) interest rates are over the roof and insurance is so high that you can no longer qualify for those homes.”
Still, Kerin said potential buyers shouldn’t give up on their dreams. “It may take some time for the market to settle, but trading will be open soon,” he said. “You can’t hibernate for six months because you can miss something. You need to keep watching, monitor your qualifications, and become more realistic.”