Owning a home is part of the American dream. But for locals, finding just the right house in today's highly competitive market can be a challenge. Despite a short-lived slump following the terrorist attacks of Sept. 11 -- and a new awareness of the health hazards and financial costs associated with toxic molds being found in old and new homes alike -- the demand for houses is up both nationally and locally. Existing home sales set a new record in 2001, according to the National Association of Realtors, and the demand is showing no signs of weakening.
"The interest rate motivates the market and generates the opportunities to buy," says Joe Ory, a Realtor with RE/MAX New Orleans Properties. "It's been under 8 percent for several years; buyers are coming out of the woodwork."
Ory cites a shaky stock market as an impetus to buy as well. "[Buying a house] is a way to diversify," he says. "It's a different type of investment."
For others, getting into the home-buying market is a way to build equity for a more expensive home in the future. Rick Tusson, a Realtor with Tommy Crane Inc., says he's seen an increase in the number of professionals and middle-income buyers purchasing fix-it-up properties in a variety of areas including Uptown, the Irish Channel and Black Pearl, the neighborhood that runs from Broadway to Carrollton Avenue on the river side of St. Charles Avenue. "People want to be homeowners," says Tusson. [The house they purchase] may not be in mint condition, but over time, they can fix it up and later on buy their dream home."
"There's a lack of properties on the market and a lot of interested parties throughout the area," says Erin Rody Rotolo, president of the New Orleans Metropolitan Association of Realtors (NOMAR). "If you have a good property priced right and in good condition, there are many well-qualified buyers who are looking for what that home has to offer."
Acquiring a Mortgage
With interest rates conducive to borrowing, many locals are either refinancing or buying new homes. Current rates for "conforming" or regular loans range from about to 6.5 to 7.5 percent. "Normally with the economy the way it is right now, real estate trading would be down," says Gregory Dines, branch manager of Plaza Mortgage Company, headquartered in Slidell. "But because of the low interest rates, the purchase market is doing about average and many people are refinancing."
Plaza is hoping to bring in new customers by promoting jumbo loans (loans more than $300,700) at conforming loan rates. "People taking out larger loans can share in with the lower rates that the regular consumer has been able to enjoy," says Dines.
Toward the end of last year, 60 percent of all mortgages being taken out at Fidelity Homestead Association, which specializes in single-family, owner-occupied residential mortgages, were refinancings, according to Fidelity senior vice president Boyd Boudreaux. "We've been seeing a lot of people wanting to get shorter loans," he says. "With rates as low as they've gotten, they can go to a 15-year loan and have their payment amount the same or less."
The number of new purchase and new construction loans at Fidelity has also been strong. Though the average life of a 30-year loan is seven to ten years, Fidelity advises clients to shop and compare because of the length of the commitment. "This is not a one-time event," says Boudreaux. "Think of it as a long-term relationship."
In Uptown, vacant lots are nearly extinct, and the number of prospective buyers exceeds the number of houses available. As a result, some are paying benchmark prices for a home.
"There simply isn't enough housing stock," says REMAX's Ory. "People are quicker to investigate a house and put offers in and then you have competing bids."
Ory says top locations are exceeding $200 per square foot, while Tommy Crane's Tusson says renovation properties that might have cost $65 to $75 per square foot three years ago are now selling for as much as $100 to $110. Record prices have also been set in parts of Lakeview and Metairie.
Buyers generally figure a house's worth in terms of location, features and condition. But a house's unique personality ups the ante as well. "I always say you're really selling intangibles," says Ory. "People aren't really buying two bedrooms and two baths; they're buying 'wow!' They want a house that speaks to them."
Dale Tynes, managing broker with the eastern New Orleans-based Century 21 Signature Properties, says buying activity and prices are also increasing in once-sluggish areas. "Gentilly is a fantastic market now because it's so close to the city and because it's ripe for redevelopment," says Tynes. Sales on the West Bank are also increasing, Tynes says, thanks to the economy and improvements in the Crescent City Connection bridge traffic.
Even buyers who might otherwise have been shut out of the market have reason to be optimistic about the prospect of owning a home. Already-existing city programs and nonprofit organizations such as the Neighborhood Development Foundation are designed to help low-income families purchase their own home, and NOMAR is hopeful that mayor-elect Nagin will make it easier for people to acquire and renovate blighted properties. "I think given the discussions we've had with the mayor-elect, he really wants to change the situation [with blighted properties]," says Rotolo. "It's a nice problem to have too many people who want to live in the city. [Nagin] really wants to do something about that and we're thrilled to have him take that on."
More than ever, Realtors are stressing the importance of inspections -- and most mortgage lenders require them. Most houses today are sold "as is" with a "waiver of redhibition," a clause that prevents the buyer from holding the seller liable for any flaws found after the sale. Knowing the condition of a house is essential for estimating maintenance and repair costs.
"Most people go with a single inspection initially," says Eileen Wallen, a Realtor with Prudential Gardner Realtors. "If he sees any kind of an issue, then we get an expert. Rather than try to coordinate all those different people, it's easier to go with a single inspection. The purchaser chooses the inspector and if they prefer to use individual inspectors, that's fine too."
George Swain, owner of the real estate inspection company Home Spec, says his general inspection includes roof, foundation, exterior walls, air conditioning, heat, electrical, plumbing, wood rot, termite damage assessment, and mold and mildew -- the latter a growing area of concern. Home Spec's basic inspection costs about $250, but when evidence of mold is found, Swain now offers clients the option of mold testing, which costs an additional $350 to $500. Tests such as air samples and swabs are sent to an out-of-state lab for results, which are then interpreted by an industrial hygienist, who makes recommendations for remedying the problem. Results take a week to 10 days, and depending on the type of mold, clean-up can be as simple as cleaning with bleach or as costly and time-consuming as hiring a professional company to rid the house of contaminated areas and materials.
"There are no regulations," says Donald Makofsky, an inspector who does the testing for Home Spec. "Most people follow the EPA guidelines or the New York Report. We recommend that people follow the hygienist's recommendations."
Home Spec has performed mold tests for more than a dozen clients in the last month, and some clients have backed off of purchases when mold has been found. "It's become a liability issue," says Swain. In fact, just last December, J. Robert Wooley, the acting Louisiana Commissioner of Insurance, authorized Louisiana Insurance companies to issue revised Standard Insurance Policy statutes, which disallow mold coverage whether or not it is the result of a covered loss.
"This puts the responsibility on the homeowner to have the mold tested and cleaned at their own expense, whereas before this exclusion, if mold was caused by a covered peril, coverage could be found in some insurance policies," says Brian Bordlee, an agent with J. Everett Eaves, Inc., and a homeowner currently having mold remediation done in his own home.
For those who don't want to deal with the headaches of even regular maintenance of a house, condominiums provide an alternative. Among the local offerings is Fleur du Lac, a seven-floor, 30-unit lakefront condo development that was 75 percent pre-sold before it broke ground in 2000.
"People are just starting to get the condo bug," says Leonard D. Stone, a certified property manager with REMAX Commercial Brokers. Stone managed some 1500 condo properties around town for 10 years before becoming one of the developers of Fleur du Lac. "They see elsewhere where people's lives are simplified. Today in most families where both the husband and wife are working, they don't have time to take care of the lawn and worry about the roof. They want to use their spare time for recreation and quality of life."
All of Fleur du Lac's unit owners are locals who use their condos as their permanent residence and most are in their 50s. Prices range from $400,000 to a million dollars, and residents pay a monthly condo fee for upkeep. Among the amenities are 24-hour security, a health and fitness center, a pool, a party room, a dining room with catering kitchen, a media room and parking.
"Most of our buyers are empty nesters," says Stone. "They want to simplify their life."