Louisiana may be on the verge of a large housing crunch due to not just the recent flooding causing disruption to thousands of homeowners but also the economic situation in large metro areas in the state according to a recent report from The Home Story presented by Fannie Mae.
The report states that in particular, New Orleans, while having escaped most of the flooding, is seeing an economic slowdown that is impacting their housing market.
“The backsliding economic situation in metro New Orleans is disappointing,” says Kim Betancourt, director of economics for Fannie Mae’s Multifamily Economics and Market Research (MRG) group. “New Orleans’ short-lived economic recovery is over, and the metro area is on the verge of slipping into a recession.”
The report notes that this is due to the economy feeling the full effects of booming oil prices gone bust. Fannie Mae says that reports from Moody Analytics show that they do not expect to see a revival in New Orleans until 2019, when job growth will amount to just 0.7 percent. Suffering from lingering low oil prices and muted U.S. exports, they anticipate that total local employment will slide 0.4 percent over the next five years. This is compared to a national gain of 1.1 percent.
Despite this, Fannie Mae notes that there are some bright spots in New Orleans’ economy such as oil refineries. The report notes that these have registered about 6 percent gain in employment year over year, and wages are higher than average. Additionally, the commentary notes that “the metro’s well-developed port and logistics infrastructure remains one of its strongest economic drivers.”
Business costs are also “quite attractive” for bringing new companies to the area at 89 percent of the national average, according to the Fannie Mae commentary. Prosperity NOLA is one example of how the city is hoping to capitalize on its strengths. They do note thought that the cost of living in New Orleans registers at 103 percent of the national average.
“A focus on more professional, scientific, and technical jobs would be a big help and could help propel the Crescent City to a brighter future in the next decade,” says the Fannie Mae commentary.
Meanwhile, uncertainty hangs over the extent to which recent flooding has further disrupted housing in parts of the state.
The report says that the AP reported initial estimates of damage to more than 40,000 homes have been revised to reflect upwards of 60,000 or more.
Fannie Mae cites The Baton Rouge Advocate, who reports that the state capital of Baton Rouge is in for a “crazy” housing market — at least over the short run — as people scramble to find temporary shelter while they restore their damaged homes.
In addition, The Greater Baton Rouge Association of Realtors® reports that the inventory of homes for sale on the local market is inadequately low to meet the needs of displaced residents. They state that before the flooding, there were 3,382 homes on the market which is only a 3.9-month supply at the current sales pace.
Fannie Mae shares that over the longer term, some of those who are active in the Baton Rouge market expect to see housing demand shift away from flood-impacted areas to higher-elevation locations where homes avoided serious flood damage.