Native homebuyers ‘tackle all sides’ as mortgage and insurance coverage prices soar | Enterprise publication

Earlier this year, Gentilly resident Courtney Latiker was thrilled that she and her two teenage daughters, who live in a rented house in the Milneburg neighborhood, could soon settle into a home of their own.

She secured a mortgage lender, enrolled in a first-time buyer program, and qualified for a loan in advance. She found a three-bedroom suite near Hayne Avenue in New Orleans East that had the features she wanted, including a good dresser.

Then a big shoe dropped in value: “Insurance prices skyrocketed,” she said.

Even though her target home was located in a low-risk flood area, Latiker’s buying effort was based on FEMA’s new flood insurance rate structure, which increases projected premiums her expenses and pushed her total costs above what her lender had allowed.

“The rising costs hit me,” Latiker said.

At a time when the most obvious challenge for New Orleans-area homebuyers seems to be rising mortgage rates, local agents say a variety of problems are threatening to cool the growing housing market. hot.

Mortgage rates have skyrocketed, but there are also costs for homeowners and flood insurance for many areas. At the same time, inflation is ingrained in the nest. All told, it turned out to be what is known as a nightmare situation for residential real estate in the area.

“We are being attacked from all directions,” said Realtor Bryan Jourdain.

The latest figures from the South Bay Area Real Estate Information Network, which tracks home sales in the area, show homes selling fairly quickly in the 10-parish metropolitan area in May, with home numbers sold to the market in 25 days on average, down from 35 days in the same month a year earlier. The average selling price for this year, as of the end of May, was $278,000, about 9% higher than last year.

But the report did not mention June, when a 75 basis point increase by the US Federal Reserve increased the heat on mortgage rates. And a monthly piece of data provides a warning sign. Closings in May were down 7.4% from a year ago, and closings were down more than 8% year-over-year.

Meanwhile, market watchers say some residential areas have begun to cool off.

David Favret, president of the New Orleans Urban Brokers Association, predicts that higher mortgage rates “could have a chilling effect” on the market. So far, the impact on the price has been limited and he is expecting a “soft landing”. But he expects the higher-end housing market to be the first to feel the effects of higher mortgage rates.

“Home prices above $800,000 are starting to fall, so I predict we will see the first impact on the luxury market,” he said.

Insurance fight

Jourdain, a New Orleans agent who recently sold several properties in Slidell, says that if higher loan rates are worrying buyers, the cost of insurance should gradually decrease.

Four hurricanes have made landfall in Louisiana since 2020, triggering more than half a million claims. This drop has put additional financial pressure on insurers to cover losses. Seven companies with state policies have failed and about a dozen others have pulled out of the state, leaving homeowners with fewer options and skyrocketing premiums.

In addition, more than 13,000 people have turned to Louisiana Citizens Insurance Corp., the state’s last insurer to charge more than private market coverage.

“I just had a client get a $10,000 quote for homeowners insurance,” Jourdain says. Before his client made an offer on a target home, Jourdain met with current owners and learned that they were paying $2,800 annually for insurance.

“I know the buyer will have to pay more, but my guess is that the premium could be around $5,000,” he said. “10,000 dollars is ridiculous.”

For buyers who can afford such surprises, the jump in costs likely won’t come between them and a new home. But for first-time buyers like Latiker and others who have to rely on loans to close deals, such a cost spike can be a killer.

Rate increase

While acknowledging that higher interest rates are probably needed to help fight inflation, Jourdain said rates have risen too quickly. “Not too long ago, some of my clients were able to get a 2.5% mortgage rate, and now having an interest rate in the 6% region is way too fast,” he said. “We actually had to re-qualify some of our customers (for mortgages) because the new interest rates pushed them out of the way they could afford.”

Dealers acknowledge that past low interest rates cannot last indefinitely, but they say both buyers and sellers need a measure of predictability that the current market lacks.

“You can work with the system if you know where it is going, but when rates go up suddenly, it hurts people in so many ways, and not just in buying homes,” said Jim Kerrin, Real estate broker Latter & Blum said. New Orleans.

Kerrin points out that people are facing higher costs of food, transportation and services due to rising inflation.

Additionally, many Louisiana residents will soon face higher electricity bills due to Entergy Louisiana’s recent increase. And Orleans Parish homeowners could see higher property taxes as last year’s Hurricane Ida-related one-year rebate expires and more homes return to their pre-Ida assessments.

Difficult for first-timers

Bonnie Buras, Belle Chasse-based agent who considers tripling mortgage rates, flood insurance and homeowner’s insurance “a nightmare,” says buyers really want it. Moving house is looking for ways to do so.

She pointed to a couple she worked with who wrote six different offers but failed to win a home because the offers had to be based on them selling their existing home.

“Eventually they sold the house and moved in with their son,” says Buras. “They could then make an all-cash offer for a new purchase and we got a home for them.”

But for buyers who don’t already own a home, the road can be tougher. Kerrin notes that in the past, first-time buyers often found that buying a pair was a good way to enter the market, as they could live on one side of the house and use rental income from the other side to monthly payment. .

“Last year people did it like crazy,” he said. “But now that interest (interest) is over the roof and insurance is so high, they can’t qualify to buy those homes anymore.”

However, Kerrin said buyers shouldn’t give up on their dreams. “It may take a while for the market to calm down, but another deal is on the horizon,” he said. “You can’t just hibernate for six months, because you might miss something – you have to keep looking, keep track of what you’re eligible for, and just be more realistic.”