Henry Opotowsky recently attended the 13th Annual Economic & Real Estate Forecast Symposium presented by Gulf Coast Bank & Trust Company, in partnership with the New Orleans Metropolitan Association of Realtors (NOMAR). The theme of this year’s conference was “Adapting to Unpredictability,” which was topical given the current market conditions surrounding rising interest rates, insurance premiums, and the costs of construction, materials and labor. Henry shares highlights from the presentations on the economy, banking and real estate markets.
Past, Present and Future of the National Economy
Contradicting the economic forecasts from last year, the National Economy has not gone into a recession thus far in 2023, as many economists had predicted.
The Economy has proved resilient this year, despite starring down the barrel of recession. In fact, Danushka Nanayakkara-Skillington, the Assistant Vice President for Forecasting and Analysis at the National Association of Home Builders, noted that the national GDP has grown by more than 2% this year, and she forecasted growth up to 4% for Q3 of 2023 thanks to a recent uptick in consumer spending. Nanayakkara-Skillington also pointed to recent positive jobs report which showed the jobs market has nearly fully recovered from the layoffs during the covid-19 pandemic.
New Orleans Economic Report
The New Orleans area lost over 100,000 jobs as a result of the covid-19 pandemic, mainly in the hospitality, transportation and utilities sectors. And although the we have seen a recent upswing in local hiring, we have not fully rebounded to the pre-pandemic jobs level in the area, according to Paul Hendershot, Managing Director of Analytics for CoStar. Hendershot also said the construction, education and health sectors have seen an increase in jobs reporting this year in the greater New Orleans area.
LSU Professor Brian Andrews, who moderated the “Challenge of Underwriting Today” panel, started-off the session by recounting a conversation among a group of homeowners at lunch. One member of the group said: “My insurance went up 100% this year,” to which another person at the table responded: “Only 100%? Man, you are lucky!”
Navigating the challenges posed by the sharp and sudden rise in insurance premiums for both homeowners and business owners alike was at the forefront of both the speakers’ and attendees’ minds.
During the Underwriting session, the panelists, which included John Zollinger, Executive Vice President at Home Bank, Meghan Donelon, Market President at Red River Bank, and Hamilton Blanton, Market Manager at Bank Plus, were all sure to mention that their respective institutions are “open for business.” The bankers made it clear that liquidity is not an issue and they are still making loans each and every day. But the structure of the recent loans being made has changed, and borrowers are having to cough up higher down payments, or larger equity positions, to obtain lines of credits compared deals in recent years.
Of course, the recent uptick in interest rates has also contributed to thinner margins on loans that banks are making. “Deals that might have worked last year, or in 2021, probably don’t work today,” said panelist Zollinger, a nod to the fact that developers are suffering from higher expenses on their balance sheets in 2023 compared to recent years.
Residential Real Estate Market
Title Attorney Bob Bergeron of Crescent Title believes it’s not a bad time to buy a house right now. He alluded to the fact that locally, after the market shot up in the second half of 2020, 2021, and 2022, it has cooled down and there are deals out there for the savvy and shrewd buyer.
Sellers are getting creative and finding alternative options. Bergeron mentioned that he has seen more owner financing options offered at residential real estate closings in recent months as a response to the increase in interest rates. Some “would-be-sellers” are even opting to just rent out their homes in hopes for getting a higher sales price at a later date.