Monday, February 05, 2007

Adam Smith, Call Your Editor

It's said that people in Louisiana do things a little different. Why even the laws of supply and demand don't always apply.

NEW ORLEANS - John Schaff, a New Orleans real estate agent, recently advised a property owner to lower the asking price of a condominium at 3915 St. Charles Ave. by $20,000.

Before Hurricane Katrina, the 1,000-square-foot condo would have sold for the original asking price of $329,000 — but not these days, Schaff said.

The growing condo glut in New Orleans has experts predicting prices will fall and developers will have to target a less-affluent market.

In Uptown and the Warehouse District, 349 condos were for sale from October through Tuesday, Schaff said. That’s a 112 percent increase over the 165 condos for sale during the same period in 2005 and 2006, and a 92 percent increase over the 181 for sale during the same period in 2004 and 2005.

“There are a lot of units on the market. You’re going to see asking prices start to come down more,” said Shaun Talbot, vice president of Talbot Realty Group.

Talbot described the downtown condo market as soft.

Fewer units are selling.

Condo sales are down from pre-Katrina levels, according to the New Orleans Metropolitan Association of Realtors.

In January, 50 condos sold in all of Orleans Parish, down from 88 last January and 81 in January 2005. Only January 2004 had fewer sales with 30.

“We’ve have a lot of people looking and not really acting,” Talbot said. “They know there are a lot of units on the market. But there doesn’t seem to be that same sense of urgency (as immediately after Katrina).”

Average selling prices are rising, according to NOMAR.

In January, the average price of a condo sold in Orleans Parish was $268,216, up 5 percent from $254,954 in January 2006, up 30 percent from $206,534 in January 2005 and up 12 percent from $239,310 in January 2004.

“It’s by no means a depressed market in terms of price. But you’re not going to see the incredible double-digit increases on a year-to-year basis that we’ve seen in the past.” Talbot said.

Six months from now, condos might command higher prices, Schaff said. But not now.

So, some developers are turning their attention to a lower price range in hopes of attracting buyers. New Orleans native James Huger is one.

Construction is wrapping up Huger’s $4-million Charlotte Commons, a three-story, 24-unit project on Carondelet Street one block off St. Charles Avenue near Louisiana Avenue.

Huger is selling condos for $197,000 to $325,000. They consist of a dozen 1,250-square-foot two-bedroom, two-bathroom units and a dozen, 875-square-foot two-bedroom, one-bathroom units. They all have wood floors and granite countertops. Some have views of downtown.

“We’re after the people who can’t afford the traditional Warehouse (District) stuff, who want something new, good location and secure parking. We try to price things a little bit under the market,” he said.

Huger calls his project the “canary in the cave” because the market’s absorption of the condos will show how much demand there really is for housing, he said.

“We’re just rolling the dice that we can sell them,” he said.

It’s too soon to tell how much demand there will be for Huger’s condos, which he plans to finish this month. Huger held his first open house Jan. 20.

“In a way he’s right. If there is that much demand for housing and he’s got a product that’s reasonably priced in an area that’s OK, not fantastic ... then that tells us that the market is not that strong,” Talbot said.

One thing going against Huger’s project, Talbot and others say, is that it’s on the “wrong side” of St. Charles Avenue because it is not on the river side.

But if Huger prices the condos right, they “should sell,” Talbot said.

“I think we’ve brought a product to the market at a price point that no one else is bringing to the market, certainly not for new construction,” said Larry Patterson of G&H Construction & Restoration, which is building Huger’s condos.

John Rareshide, a New Orleans developer, said the New Orleans condo market is healthy for units priced around $200,000.

“It’s a price point. That’s what’s selling right now,” he said.

Rareshide recently sold five, 425-square-foot, one-bedroom condos for $135,000 each at 1200-1210 Austerlitz St. The units were renovated, he said.

He also developed 12 condos at 3308 Prytania St. Those units hit the market roughly two weeks ago. Rareshide is selling the 531-square-foot, one-bedroom, one-bathroom condos for $179,000.

My own analysis of this is that those who could afford the pricy condos in the Warehouse District have already bought into the market. Those with a smaller budget, till now, have been left out. Whether or not they will buy into that market remains to be seen.

In the meantime, people are still waiting for their LRA money to rebuild the own homes.

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