Q&A: Business economist weighs in on real estate market ahead of NOMAR’s annual symposium

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Gary Wagner

Dr. Gary Wagner, business economist and endowed chair at the University of Louisiana Lafayette, said the interest rates hikes that began in March 2022 have led to a cooling off in residential markets as expected.

“There are some pockets where year-over-year prices are still increasing, but we are now seeing year-over-year list prices, and to a lesser extent sale prices, decline across most markets,” Wagner said. “I think it’s important to keep the cooling off in context – 2021 and 2022 were generational housing markets in terms of price appreciation – something that we see once every 25 years. I do expect prices to stabilize over the next 6 to 12 months because of some positive news on the inflation front.”

Wagner will offer a residential market update as one of the featured speakers at the upcoming 13th Annual Economic and Real Estate Forecast Symposium hosted by the New Orleans Metropolitan Association of Realtors (NOMAR) and its Commercial Investment Division.

The event will take place from 8 a.m. to 6 p.m. on Thursday, October 5, at the Jefferson Performing Arts Center.

Are we in a seller or buyer’s market?

I don’t think the market is heavily tilted in favor of buyers or sellers at the moment. While list prices have declined a little, which is good for buyers, inventory levels remain below pre-COVID norms in many areas, so there are fewer options for buyers than a few years ago. The low inventory levels, at least compared to normal times, are helping keep prices higher than they would otherwise be, which is good for sellers.

What is the current trendline regarding value? Is the market going up or down?

In general, we are seeing some modest declines that are a bit stronger in the New Orleans area than in Baton Rouge.

What is the level of residential inventory in the market today? How does that compare to the last two years in the region?

Great question. Much of the variation in listing and sales prices today are the result of how much inventory levels have rebounded since COVID. For example, the months of available supply in the Greater New Orleans area is very close the average from 2016 to 2020. In contrast, inventory levels in Baton Rouge have not rebounded as strongly. Because of this, we are seeing more price adjustments in the New Orleans area than in the Baton Rouge Market.

Has the days on market changed since the beginning of the year?

Yes. The median days on market has been gradually increasing this year in just about every market. The figure is around 70 days in Greater NOLA and around 45 days in Baton Rouge. Although days on market have increased, residential properties are still selling in about half as many days as the average home between 2012 and 2019.

Has the uptick in interest rates impacted value, days on market, and level of inventory?

Absolutely. This has probably been the single largest factor impacting residential real estate markets in the past year.

What is your prediction for interest rates?

The outlook for interest rates depends largely on inflation – how fast average prices in the economy are increasing. We have had some very positive inflation news in the past four months. If recent trends continue, I expect to see interest rates and mortgage rates remain steady into mid-2024.

What is your prediction for the region?

I think we are going to see a return to “normalcy,” meaning real estate markets that looked like 2016-2019 rather than the red-hot markets what we saw the past few years. If mortgage rates stabilize, and I think they will, and inventory levels continue to expand, I expect a modest increase in activity in the next year.

Is affordability a big challenge in the marketplace today?

I think it is primarily because of mortgage rates doubling in the past 18 months. One positive note is that the job markets in Baton Rouge and New Orleans are two of the strongest in the state right now.

What advice do you have for the home buying community?

Be patient. I do not expect to see mortgage rates in the 3% range again any time soon. That being said, mortgage rates between 6.5 and 7% are still low from a historical perspective, and, if possible, consider making a large down payment. With inventory levels rebounding, options for buyers should improve in the next 12 months.

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