New Orleans Real Estate
Member since 2019 · 14 posts · 2 votes
Was curious about the conditions of the wholesale real estate market in the New Orleans metropolitan area. I read a bunch of blogs on here from 3 years ago and the consensus was that the market was flooded with to many investors. Now 3 years later given the hot market and slow transition from sellers market to buyers, where are we in this area with wholesale investments. I have noticed a lot of startup companies of the buy your house now with cash- businesses popping up in frequency around the city, is going this route a way of circumventing the real estate agent?
Hey @Ryan Stubblefield. I am both an investor and a licensed realtor in New Orleans. The market is still saturated with investors, wholesalers and realtors. We are also still in a sellers market. The plethora of new companies you mention are mostly new wholesalers. Everyone wants to be a wholesaler now. The gurus are out there pushing it hard and making a fortune from selling their seminars, courses and conferences. Everytime you turn on the radio here you hear an ad for one of them pushing their weekend seminar. Everyone thinks it is a get rich quick business and that it is easy. It is not. It is hard, and even harder now that there are 5 jillion people trying to do it. There is an extreme amount of competition out there. It has gotten very difficult to find a good deal and when you do there is almost always someone willing to pay more than they should for any given property.
New Orleans is what I call a small big city. The NOLA MSA is made up of about 8 parishes and comprises a whopping 1.3 million people. Pretty small number for such a large area, especially compared to other major cities. We have the river to our south and the lake to the north... there is only so much land and so many houses in between. But now we have about 5 times as many investors and wholesalers and we have added about 2,000 realtors to the ranks in the last few years. Lots of people all competing for the same number of houses. Markets like Dallas, Houston and Atlanta just keep growing because they keep spreading further and further out. They keep building new subdivisions and adding more housing. We don't really have that here. The only place you will find new subdivisions is on the Northshore.
As far as the market is concerned, our peak was 2015-2016. In 2015, Orleans Parish saw a 14% increase in the average home price. That was followed up by another 3-4% in 2016, so we had an almost 20% increase in values in those two years. This is when we saw some really rapid appreciation. OP ended 2017 down about 3.5%, and up about that much at end of 2018. So those two years kind of cancelled each other out.
The end of 2018 looked like the market was starting to turn and the beginning of 2019 started off slow, but once the FED announced they would not raise rates any further this year, things took off again.
For 2019 prices have been stable with a modest appreciation. It seemed we would return to a more normal market, but now that the FED is playing with the numbers again and has made their recent cut to the benchmark rate I would expect the next 12-24 months to remain steady as they are now.
You can go back and look at the records for 100+ years and you will find that real estate is cyclical. It follows the same 4 phase cycle over and over again.
Phase 1 - "Peak" - - Unit sales increasing, Prices increasing, Inventory decreasing
Phase 2 - "Correction" - - Unit sales decreasing, Prices increasing, Inventory increasing
Phase 3 - "Trough" - - Unit sales decreasing, Prices decreasing, Inventory increasing
Phase 4 - "Recovery" - - Unit sales increasing, Prices decreasing, Inventory decreasing
The 4 phase cycle usually takes about 8-10 years, but the FEDs manipulation of rates for an extended period of time has caused this cycle to move along much slower than what is normal. A correction will come. It always does...
I would say we are in the early stages of Phase 3 of the cycle, but we should be further along than that.