April Stats: Are We Back To “Normal”?

The COVID-19 emergency has officially been declared as being “over”. Hundreds of thousands of people turned out at the Fairgrounds the last couple of weekends to celebrate. You should have seen it. A ton of live music and great food. It was quite the thing.

Now that this nightmare is finally behind us, let’s see where the real estate market in New Orleans is now compared to the last pre-COVID April in 2019. It’s felt like we’ve returned to what used to be considered normal. Do the stats bear that out? (All stats are for Orleans Parish only.)

Being the stats nerd that I am, these numbers tell an interesting story. For all of the crazy appreciation in prices that occurred while mortgage rates were at historic lows, it averages out to 5% per year. That’s downright healthy and sustainable, thanks largely to the monthly price increases hitting the brakes in the last year.

(By the way, look at that jump in price per square foot. Almost all of that increase took place over 9 months, between January 2021 and June 2022.)

Demand is notably lower than it was in 2019, with both pending sales and closed sales off significantly. Mortgage rates are in the low 6% range right now, while they were around 4.2% four years ago, which certainly has an impact. Another factor is a lot of buying demand was eaten up in the last couple of years, when rates were half of what they are now. It will take some time to build that demand back up.

What’s kept prices from tumbling has been lower inventory. However, the number of homes for sale is only down 10% from April 2019, while demand is off about 25%. That’s got to put some downward pressure on prices. You can see that our months supply of homes for sale is slightly higher, even though there are fewer homes for sale. That’s a direct result of fewer buyers being in the market right now.

We’re not quite back to “normal” yet, but we should be there in the next few months. Lower demand will push inventory up and I expect prices to come down, but very slightly. There still is not anywhere near enough homes on the market for there to be a bubble to burst and send prices tumbling. However, I can see prices in April 2024 being 2-3% lower than what they are now. At that point, mortgage rates should have come down and a replenished pool of buyers could start to turn the balanced market into one that will favor sellers again, but not as extremely as the one we saw during the COVID years.