The nation's credit crisis has made Americans skittish about borrowing money and banks reticent about lending it. With the mortgage market already in shambles before the recent bank failures and subsequent bailout plan, these troubles don't bode well for the state of real estate. But local real estate agents say New Orleans seems to be faring well amid the panic because, as in many other respects, the city is "a little bit different."
Some real estate agents say they have detected some changes but haven't experienced huge detrimental effects from the crisis.
"I haven't seen the big hit at all," says Anne Comarda, who co-owns an Old Metairie-based real estate business with Joyce Delery. "What we have seen is that [the credit crisis] takes the marginal buyer out of the market someone asking for 100 percent financing doesn't have really good credit. [The credit crisis] actually sends it back to the old days. The more you have to put down, the better. You need to have some savings, a good credit score and be a good, solid buyer."
Clare Paletou of Prudential Gardner Realtors says buyers also are more timid in light of the national crisis.
'I've seen buyers be more cautious," she says. "They tend to be waiting to see what's going to happen in the market before they proceed forward. More say they're not ready to buy, they're just looking. [The crisis] has affected buyers I'm working with because a fair number of them are just feeling out the market right now."
Michael Baker of Realty Resources Inc. has seen the same trepidation, but more so with banks in granting mortgage loans. Overall, he says, it will take some time to see the full effects of the economic downturn in the local market.
"It's hard to say (how the crisis is affecting us)," Baker says. "Some banks are responding in a less-than-rational fashion, some aren't. It's going to require some time (to determine what results the crisis will have). I'm not getting the same response from all the banks that I deal with." Even people with good credit and steady employment are getting turned down for mortgage loans, he says. "It's a pretty bad idea not to lend money to someone who is credit worthy. It's not rational. If banks don't make loans, they don't make money.
'But some are (conducting) business as usual. Sure, they're taking a harder look at the quality of loans we're sending, but they're not balking."
Despite a rash of foreclosures across the nation and trepidation over the financial crisis that caused the federal government to allocate $700 billion to bail out the financial industry, those in the real estate industry in New Orleans say the market hasn't changed substantially since Hurricane Katrina, and most offices are enjoying business as usual.
"The phones are ringing as much as they were," says Elijah Marten Feibelman of Coldwell Banker TEC Realtors. "I think New Orleans is a little different. Post-Katrina, (we were) already dealing with tighter lending standards to begin with."
Properties tend to be a little more expensive, however, he says, and that comes as a bit of a shock to new buyers.
"I think we're starting to see just the market changed to where New Orleans is going to have a lot more townhouses and condos because entry-level buyers won't be able to afford a single-family home in the neighborhood they want," Feibelman says. "I think it'll be a shock because we didn't grow up with townhouses and condos. I think it's an adjustment that $300,000 won't buy the house you want anymore."
Paletou believes New Orleans' real estate market is perhaps in better shape than most places in the United States. "I think we're doing fine," she says. "A lot of it has to do with Hurricane Katrina. More funds are available for renovations. And with Katrina's devastation supply is small and demand is now greater than the supply."
Louisiana is still relatively insulated from the rest of the nation's unprecedented number of home foreclosures, ranking 42nd on the national database RealtyTrac's August list of foreclosures. Baker says the state's low number of foreclosed properties is a good indication of the market's vitality.
"I think our local market is different because of a housing shortage caused by Katrina," he says. "I look at foreclosures every week that I am certainly not comfortable with, but it's not a tsunami. We're not competing with foreclosed houses (like in other parts of the country). Banks can sell for less than homeowners. We're not seeing where there's more foreclosed properties than properties for sale, and hopefully we'll never see that." What buyers want People in the market to buy a home despite financial uncertainty are looking for a variety of things. But in general, real estate agents say, buyers want a high-quality house one that requires few renovations at a good price in the neighborhood they want to live in.
"(Buyers want) a good deal," Feibelman says. "People aren't going to pay what they feel (a house is not) worth. They know there's a glut of homes for sale, and so few buyers. Whereas before, an office or very small room (could be) passed off as a bedroom (and) people would settle just because of the location. These are top-tier buyers if they want three bedrooms, they're willing to wait."
Other realtors say that while buyers in the past may have been willing to buy a home that needed repairs or updates, more buyers now want a property that already has been renovated.
"More buyers want something that is done and they can move into," Paletou says. "Fewer want something that needs work."
Baker also has seen the trend of "top-tier buyers" populating the market.
"There has been a slight shift to quality in the last 12 months," he says. "The higher quality the renovation, (the) more people are interested in it. In years past, people were willing to accept things that had minor flaws. We're seeing that in the Uptown market. Obviously, in the flooded market it's different."
Among buyers, does the real estate mantra "location, location, location" still rank at the top of their lists?
"Right now, 80 to 90 percent (of sales) are about location," Feibelman says. "People just want to be in the neighborhoods they want to be in. Even if they need a bigger house, they're going to wait."
Adding to his comment about a trend toward buyers wanting higher-quality houses, Baker says, "Location always has, and always will be (a factor, but now) condition's playing a bigger roll."
"It's all about location," Comarda says. "If a buyer is a good, solid buyer, they have their pick of what they want. (They) give me wish list, then we can find it."
As for how long a buyer or seller should expect a home to stay on the market, agents say it is hard to predict.
"There's no set (time) frame," Feibelman says. "We still have houses all the way from (Katrina), flooded properties that might be under $100,000, up to million-dollar homes that won't even last a day on the market." The future of New Orleans real estate With the stock market fluctuating like weather, uncertainty fills the future of the financial sector; it can look grim or promising, depending on the day. These real estate agents are confident the local market will continue to thrive.
Baker sees a promising new group of people buying houses, which bodes well for the future of real estate in the city.
"I see a good picture, frankly," he says. "A younger, better-educated person is moving to town, and that holds a good future for us. Unfortunately, those people are strapped with student loans, but loans won't be around forever. The typical buyer has been someone younger, more educated, and has a passion for the city. It is a younger crowd that wasn't as interested in New Orleans before."
Comarda also sees a positive future for New Orleans because, again, the city is not a typical metropolitan area.
"New Orleans has always been a little different and will continue to be a little different," she says. "The market will still be strong, (because we) have things to offer that other cities don't.
"It's more of a lifestyle destination. Once people come (to New Orleans), they don't want to leave. You have to drag them out. I really see our market staying good and strong. We don't get super hot or cold, we just move along. I think New Orleans is going to be just fine. We have a lot of good, solid lenders who are local. They can handle this."