February 28, 2010
How’s the Real Estate Market?

Just about every day someone asks me, “How’s the real estate market?” This week I had an opportunity to hear Gary Keller, Chairman of the Board of Keller Williams Realty, present his views. This was an outstanding talk, and I thought I’d share some highlights with you as well as a local perspective.

There are 5 numbers that drive real estate: 1) home sales, 2) home prices, 3) inventory, 4) mortgage rates, and 5) affordability. Here’s where we stand.

Home Sales

We like to think of ourselves as different from the rest of the nation. We are reassured in knowing that our local economy is stronger than most. And, although we have short sales and foreclosures, the incidence is not nearly as pervasive as it is in other areas of the country. Our local economy and real estate market were disrupted by Hurricane Katrina, and it’s been hard to measure the impact of those events alone. But, a comparison to national trends shows many similarities.

Nationally and locally, the number of home sales peaked in 2005. Since then, there has been a steady decline with some sign of recovery on a national level. Locally, the number of homes sold in East Baton Rouge Parish last year reached a 10 year low.

Home Prices

When my husband and I moved to Baton Rouge 18 years ago from the Washington, DC area one of the things that attracted us was the low cost of housing. Over the years that’s changed. Median home prices across the country peaked in 2006 and have since experienced some significant declines. In Baton Rouge, our home prices kept going up until this year. As a result, the median home price in Baton Rouge is now on par with the rest of the nation.

Inventory

It’s all about supply and demand. So, how much is too much supply and how much is too much demand? A good rule of thumb is anything less than 6 months of inventory is considered a sellers’ market. More than 6 months of inventory, you’re in a buyers’ market. Our market shifted in 2008. Here, too, we are starting to look much more like the rest of the US.

Mortgage Rates

Mortgage rates are not a local phenomenon. Yes, we have local lenders and some are better than others. I am happy to give you recommendations. But the rates are not set locally. Your mortgage is bought, sold, and serviced nationwide even though you live in Baton Rouge. Mortgage rates are at an incredible low! You really need to put this in perspective and consider what happens after we pull out of this recession. Money has never been this cheap. So, borrow some and buy a house.

Affordability

At the end of the day, the number that sums it up is "Affordability." What is that? It's defined as the percent of median income required to make mortgage payments on the median priced home. Median income means that half the households make more than this amount and half make less. Median home prices mean that half of all homes cost more than this amount and half cost less. It’s another way of saying, "what does my money buy me?" The research team at Keller Williams put together the graph below. What this graph should be telling you is that if you are thinking about buying that first home, the likelihood is it will never be this inexpensive again. If you are thinking about moving up in housing, this is the time to do it. I can't think of anything more compelling than this to show you. At the risk of sounding like a very well known local car salesman, "TODAY!" is appropriate "DARLIN'!"

So, what do we know? We really are not that different from the rest of the country and the opportunities for buyers are unprecedented.

Call, write, email, text … it doesn’t matter. If you’re thinking about real estate we should talk.

Helene Kurtz, Realtor
Keller Williams Realty Red Stick Partners