Suck it up. Home prices are going to continue to rise. Here's why.
Why are home prices continuing to rise? Well, let's start with another question. How'd you like to have your money work harder for you? You know, without putting in much work?
According to the National Association of Realtors, "Over the past 30 years, single-family existing-home sales prices have increased at an annual pace of 4.3% as of 2021 Q4, with home prices accelerating at a faster annual pace of 8.3% over the past 10 years."
Perhaps 4.3% - 8.3% isn't the sexiest ROI you've ever heard, but here's the thing. You get to live in it. No additional rent charges unless it's that positive income coming from your short or long-term renters.
Plus, "in 2020 and 2021, nearly two-thirds of 183 metro areas tracked by NAR witnessed double-digit increases in the median single-family existing-home sales price."
See any places you recognize? New Orleans is at the bottom of the chart. That doesn't make it the bottom market. This is taken from a list of 183 markets making the rise in wealth through homeownership in NOLA within the nation's top 10%.
Isn't it a silly time to buy with prices sky-high?
Every day, we purchase things that don't hold or even lose value. Those shoes, those veggies you forgot to eat, your monthly car payment.
However, in this market, your home will likely be worth more the day after you bought it than the day you bought it. And well, you get to live in it.
And that's exactly what's driving middle-income housing wealth. Pay close attention to wealth gained through housing in the chart below, vs the measly 5.3% rise in median family income.
Why are home values continuing to rise?
Simply put, we have too many people and not enough homes.
Like cars, gas, dog food, toilet paper, and other everyday items we are seeing less of, there's also a housing shortage.
How come? The supplies necessary to build more homes aren't readily available, and they cost more. And, labor is already busy rebuilding homes hit by Ida.
The average cost build a new home in New Orleans today? About $200 a square foot.
That means, if you can find good labor, you can't build a standard 3 bed, 2 bath 2,000 square foot home in New Orleans for under $400k. And, that's before the price of land!
Land prices? About $200K for a 24*100 foot lot in Marigny/Bywater and $40K in St Roch.
Sound crazy? Sure. But, that same home in Palm Beach Gardens would cost $800k to build.
Wowza. Exactly.
It costs loads to build. Which will prevent new construction homes from hitting the market at an affordable rate. And we aren't seeing a downtrend in the buying population.
Unlike 2008's housing bubble, we have too few homes, not too many. AND people are buying and living in them.
Who's buying?
We are seeing an uptick in the home buyer market. Why? Boomers!
Boomers are living longer, AND they birthed a whole new generation of home buyers, Millennials.
The oldest Millennials are turning 40 this year. Thus, we are seeing loads of new home buyers. And loads of second-home buyers.
But the stock market!?
Here's the thing you need to know about that. When stock markets get wonky, guess what people do? They purchase alternative investments (hello crypto and NFTs), bonds (zzzzz), and real estate.
So if you're looking to make that hard-earned money werk! Think about investing in real estate sooner rather than later.
What can you expect when you do?
Prices should continue to rise
More home buyers will keep coming of age for first and second homes
Inventory should stay low until we can fix supply issues worse wide
More people will divert money from stocks into other investments like real estate
More people will likely continue migrating to places like New Orleans.
You'll also see more and more folks trading up. What? Yes. People who have been fed up with their homes for a while are leveraging its healthy equity and new value to list, sell, and trade up into places they'd rather be.
Sure the next place will cost a pretty penny too, but it likely won't depreciate any time soon either.
Why here?
Why? New Orleans is the 17th biggest market (out of 183 markets) for the rising middle class. Yes! When it comes to our growing middle class, we are in the nation's top 10%.
And while we aren't quite seeing the ROI of Mesa, Austin, Nashville, Dallas, or Houston, our town has a lot less competition, often a lower price of entry, and is a lot more fun.
Seen anyone move here recently from New York, Southern California, Chicago, Boston, Detroit, Philly, or Milwaukee. There's a reason for that too.
These seven markets represent the marketplace with the fastest declining middle class. Why? They're all coming here!
Kidding, but many of them are.
Conclusion
A shortage of homes, the cost to build, the growing buying population, and mass migrations contribute to New Orleans's housing prices. Increasing home values is responsible for New Orleans having one of the hottest markets in the United States for the growing middle class.
Holding off to "see what happens" before investing in New Orleans real estate. I suspect you'll be seeing home values continue to rise. And you'll see the buyer population continue to increase as those markets on the downtrend look to invest in ours.
If you're looking to double down on New Orleans, we're here to help.
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Voted Neighborhood Favorite by Nextdoor, Team Cool Murphy is a top-producing, licensed real estate team based in New Orleans, brokered by Cool Murphy, LLC.
Celebrated for her next-level creative approach to real estate, Elisa Cool Murphy is an award-winning, top-performing agent in New Orleans and the founder and leader of Cool Murphy, LLC.
Contact Her -
email: cool@coolmurphy.com
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