Some Good News in Real Estate

Dear Friends and Family,

The first quarter of 2023 proved to be a challenging one for the real estate industry across the country and New Orleans was no different.? As stated for the last six months, insurance, not interest rates, have been the single biggest challenge closing a deal.? Louisiana Citizens, the not for profit insurer of last resort, remains critical to insuring homes in our market.? And while the real estate market experiences economic pull backs first, we also benefit rebounds first.? Here are my three thoughts on the market as we continue into the spring selling season.

1. Sentiment does not reflect the data.?

In a crowded room of business owners, a speaker asked, “Since the failures of Silicon Valley Bank and Signature Bank, have the broader markets been up or down.? Overwhelmingly, the room said, “down.”? The truth?? The S&P 500 is up about 6%, mortgage rates are a little lower, and the dollar is stronger.? The reasons why might be arguable but I would assert the banking system is safer today than before the failures of two banks and the FDIC + Federal Reserve have proven clearly they will do what it takes to protect depositors.??

It is easy to say the market is changing (see my September letter when we asserted: “your home is worth as much now as it will be for the next two years”).? The truth is it changed.? The number of homes sold in the New Orleans area dropped 29% in Q1 2022 than 2023.? Prices are almost flat at just 4% less in the same time period and days on market has climbed from 10 days to 27 days.? We saw these changes approaching, warned of it, and have been coaching agents on updated sales tactics that work in this market. These results were reflected at our annual Top Producer Awards where I was reminded of the tremendous accomplishments KW New Orleans Realtors have made because they adopted fresh practices early in 2022.???

1. Inflation is probably slowing faster than the Federal Reserve realizes and they will once again find themselves behind the curve.? CPI is calculated using a variety of surveys and measurements to capture price growth in a sector.? Shelter has been stubborn to come down but there are a number of reasons to believe it will moderate shortly.? I spend a fair bit of time with operators of real estate adjacent businesses and have been hearing the same thing for contractors for the last few months: “the client is happy to bid and award a project but they aren’t issuing the contract.”? This hesitancy in the large construction market is starting to feel it on the bottom lines.

If you want to conduct a channel check of your own, call a commercial banker. ? Bankers I speak to are mostly saying the same thing when I ask questions about real estate lending- happy to lend on certain deals for clients that have been with them a long time and have a long track record of success but otherwise, their job is getting deposits to their banks.? Credit has tightened and this will undoubtedly slow spending and inflation rapidly.????

1. Your home is your palace and don’t miss an opportunity to buy the right home for you and your family.? This market is great news for most homebuyers.? Why?? Most home buyers have stronger balance sheets than ever and the strong job market means their job is secure.? If you see a house that can improve your quality of life and can afford it, you are crazy to not take a look.? Interest rates will be lower, many expect rate cuts this year, and insurance should moderate as insurers begin writing more in the area.? If you are on the fence, remember that as soon as rates decrease (which we believe will happen as early as Q3, Q4 of this year), the crazy multi offer/short fuse market will be back.? Today you have a chance to take a critical look at a home and get a couple (not many) concessions to do a deal.? We are in a sweet spot and we don’t expect it to last long.??

Reflecting back on the first quarter, I would be remiss to not mention how proud I am of the hard work I see Realtors doing everyday to be fiduciaries for their clients.? The high trust relationship with a client is earned in every interaction and I see KW New Orleans Agents working tirelessly to maintain that high trust.? Well done KW New Orleans family and Realtors across the city that share our values.??

Humbly,

Jeffrey R. Doussan, Jr.

Operating Principal

Keller Williams Realty New Orleans