Margaret Glass recently attended the 2021 Economic & Real Estate Symposium. The theme was “Rethinking Real Estate: Adapting to the Changing Dynamic in New Orleans and Louisiana,” and the presenters focused the current state of the market, moving forward from the Coronavirus, and addressing other imminent challenges such as climate change.
K.C. Conway of Red Shoe Economics discussed his perspective on the Southeastern Region:
- Significant inflation is expected to continue for several years, reminiscent of the 1970s, and much of the inflation is related to the housing market. Buying a home likely is a good investment as home prices are expected to continue to rise. Real estate is a good hedge against inflation.
- Major population migration has occurred and may continue to certain southeastern states (Tennessee, Texas, Florida, North Carolina and Georgia), but Louisiana is not included in this list, likely due to hurricanes. However, Louisiana is still growing in population.
- Less than 40% of office workers are returning to office environments despite wide availability of vaccines. Suburban office options are doing better than downtown locations due to convenience.
Jesse M. Keenan, Associate Professor of Real Estate, School of Architecture, Tulane University, discussed “Real Estate in New Orleans: Hospice Care or New Economy in the Face of Climate Change?”:
- Risks to our economy related to climate change include devalued property, decreased property tax income and generally less demand. However, there will likely be increased demand from people moving away from high risk areas in Louisiana to closer lower risk areas (for example, moving to the Northshore from coastal towns).
- Buyers are discounting forward looking values in high-risk zones for sea level rise particularly for multifamily investments. This impacts credit ratings. Banks are also offloading mortgages encumbering high-risk properties.
- Climate risk is causing more robust property disclosure requirements (e.g. flood risks) and declines in asset value which could trigger mortgage default in the event of a disaster. The “Climate Risk Premium” is a new line item in cost calculations. Federal entities are working on transactional systems for consumers and underwriting to account for climate risk.
- Younger Americans are more likely to factor climate change into moving decisions. Notably, around 30% of young Americans would not move to a high risk area even if it was less expensive.
- New Orleans benefits from being less expensive than other parts of the country, and there is a high demand for second homes here. However, the high climate risk, higher housing costs compared to income, high crime and lack of city development vision work against the city. Keenan believes we are also running out of land to develop, facing a brain drain, lacking affordable housing, and unable to address inequality and crime. He sees two options: (1) seek money from the federal government or (2) move the Port of Orleans and build on the higher ground near the river.
Allison Plyer, Chief Demographer at The Data Center, discussed “Census 2020: What Did We Learn?”:
- Jefferson, Plaquemine and St. Charles lost white residents but gained minority residents, indicating increased diversity of these parishes. St. Tammany also increased in diversity. This is consistent with national trends.
- New Orleans grew 12% between 2010 and 2020, but this is still reflective of population loss due to Katrina. The Hispanic population is growing quickly. The Black population also grew and is predominate, but it did not grow as much as other groups. The white population grew to 32% of the total population.
- CBD and French Quarter have average household sizes less than 1.5, meaning one-person households dominate. In Touro, Lower Garden, Marigny and Bywater, the number is closer to 1.75 but still indicates very small households. Average household sizes are shrinking in the area, which is not consistent with national trends.
- There has been population loss in Louisiana’s southern parishes, but population loss really reflects smaller families, not fewer households.
Robert Bergeron of Crescent Title discussed “The Changing Real Estate Closing Process: What the Future Holds”:
- As a result of COVID, closings have changed in many ways, from using masks to gathering outside on porches or in tents, or in separate rooms. Closers are taking various other measures to make sure clients are comfortable. Technology such as Zoom is used more often, and the risk of wire fraud and other risks related to remote technology is increasing.
- Sales numbers have increased in Orleans, St. Tammany and Jefferson in connection with low interest rates. There is a lack of inventory because sellers feel they can’t sell because they can’t find another house. Bidding wars have led to increased use of escalation clauses and sight unseen purchases (compounded by tenants not wanting third parties in the house due to Covid exposure). A continued strong market for out of town buyers is expected.
- People are looking for homes with an extra room for an office, close proximity to family or the ability to live with family, and larger yards, pools and porches. Employees who can work remotely are moving out of crowded cities to desirable places to live such as New Orleans.
- The moratorium on evictions has ended but courts are backlogged so more lessors are offering cash for keys to remove delinquent tenants. Pandemic escape clauses are being requested in commercial leases.