From Your Acadiana Real Estate Expert
Hi, guys! This is Jim Keaty with Keaty Real Estate, and this is your 2018 market update. So much has happened in 2018, and in this video we will get you up to date with all of the research data from Lafayette’s Real Estate Market.
If you don’t have time to watch the entire vide, we have the time stamps for each topic in the below.
(00:22) Lafayette Total Market Overview
(02:19) Lafayette Parish Inventory and Foot Traffic
(05:53) Foreclosures and REO Sales
(06:35) Lafayette Parish New Construction
(07:41) Existing Home Sales
(10:31) Louisiana and Lafayette Economic Outlook
LAFAYETTE TOTAL MARKET OVERVIEW
The MLS reported 151 more sales in 2018 versus 2017. That is a 6% increase in number of sales, and this is 46 more homes sold year to date than in 2015, which was our best year on record.
2018 has outperformed every quarter year on year, and we have $60 million more dollar volume year on year. That is slightly more than 2015, again, the best year on record for Lafayette parish.
May 2018 was the best month on record for Lafayette parish and the next best month on record was in 2015.
As you can see, the average sale price has increased in 2018. This can help explain why there is a much higher increase in volume than in the number of sales for 2018.
I thought I would point out that the Keaty Real Estate average price is around $250,000, which is about 10% higher than the rest of the MLS.
Let’s take a look at the monthly pendings from September of 2013 through September of 2018. May was our best month in history with 383 pendings. Lafayette Parish only broke 350 pendings twice and the last time was in 2015 with 359 pendings. Our pendings are up by 56 in September 2018 versus September of 2017, so this is a very good indicator of what is to come in the next 60 days.
LAFAYETTE PARISH INVENTORY & FOOT TRAFFIC
The MLS has reported over 2000 more listings in 2018 compared to 2017. That is 18% more actives. Many of these actives are not leaving Lafayette and need to buy another home, so they therefore become buyers as well. More actives equals more sellers and more buyers.
One way we can get a pulse on the demand and the number of buyers is to look at the foot traffic. This information comes from our centralized showing services system which realtors use to set up showings on properties. We compile the number of showing requests for each month, and this is a good indicator of foot traffic and demand.
In march of 2018 we reported a record breaking 6000 sowing request. This trend continued through the summer. September was the only month there were less showings than the same month in 2017.
Demand is up. Pending’s are up. Closings are up. But are we losing out momentum? We hope not. The increase in foot traffic indicates more buyers, but with more listings this could also reflect to buyers looking at more homes before making an offer.
Let’s now take a look at Lafayette Parish Inventory and the impact of monthly housing inventory on home prices. One way we can get a pulse on how the market is doing is to look at monthly inventory or absorption rate.
Real Estate is a function of supply and demand, and months of inventory can give us a gauge as to how much supply and demand is out there. When we say there is six months of inventory, this means that it would take six months to sell every house currently on the market.
Six to seven months is where supply equals demand. This is considered a neutral market, and home prices will only appreciate with inflation. Greater than seven months indicates too much supply and not enough demand, during which home prices typically depreciate. Anything less six months indicates too much demand and not enough supply. This is a seller’s market and the prices tend to go up.
So how is our supply and demand? As you can see, we have been hovering around six months of inventory for the last four years, and we typically see an increase in inventory toward the end of the year.
What are the number of listings entering the market? The MLS has recorded over 2359 more listings in 2018 than in 2017. That is an 18% increase in the number of listings. I do want to point out our months of inventory has only increased slightly, suggesting the new supply is meeting the demand.
FORECLOSURES & REO SALES
The perception in Lafayette since the recent oil crash is that there are a lot of foreclosures due to people losing their homes. The graph shows the number of foreclosures going back to 2007 through September of 2018 in the Lafayette market. The foreclosure sales for Lafayette Parish peaked back in the second quarter of 2013.
Now, we have seen a 50% increase in Real Estate Owned (REO) sales in 2018 compared to 2017, but it is only 29 more sales year-on-year. We do not see any indicators that this will change significantly over the next two years unless the oil industry recovery is derailed.
We always want to keep an eye on what is going on with interest rates and where they are going. Therefore, we look at Fannie Mae, Mortgage Broker Association, and the National Association of Realtors and then average all their interest rate projections. You can see it looks like we should expect the interest rate to increase slightly over the next year.
Policy rates are expected to increase in December and three more times in 2019. Strong employment and increasing inflation would support these hikes.
What does that mean for the average buyer? If we take a $300,000 house today at 4.5% versus waiting to buy the same house in 2019 with a 3% increase value at 5.1%, that is a $163 difference monthly and $1956 difference in one year. Over 30 years of payments, that would cost your buyer $58,000.
We turn to the Louisiana Economic Outlook for 2019 and 2020 by Dr. Loren Scott to see how Lafayette is doing and what to expect in the coming years.
In his Economic Outlook Report last month, Dr. Loren Scott mentioned, “the hammering hasn’t stopped but hope lies ahead. We are projecting the Lafayette economy will turn the corner in 2019 adding 1400 jobs, and then move into a stronger year in 2020 adding 4900 jobs. This is based off the assumption that oil prices will continue to rise to $80 per barrel.”
Dr. Scott and his team provide evidence that we could see oil prices rise to $72 per barrel in 2019 and to $80 per barrel in 2020. According to Dr. Scott, there is every reason to believe that the global demand for oil will continue to rise. Supporting this view is the evolving growth in two huge economies, India and China.
Dr. Scott goes on to say that the key to a serious revival in the Lafayette MSA is resurgence in activity in the Gulf of Mexico.
Dr. Scott states, “The activity in the Gulf of Mexico does respond significantly to movements in oil prices. however, what offshore investors need to get comfortable about returning to the Gulf is not only higher prices but also a sense that prices will be stable to moving upwards. Prices have now been rising for three years, and we are projecting another two years of rising prices. This pattern has already created evidence of some positive movements in the Gulf.”
Dr. Scott finishes by saying, “Oil prices rising to $80 per barrel, combined with solid performance by the big five – Stuller, Acadiana Ambulance, The Schumacher Group, GCI, and LHC is expected to generate more than 1400 new jobs in 2019 and a more robust 4900 jobs in 2020.”
Lafayette’s economy will also get a shot in the arm from the Lafayette Regional Airport’s $90 million expansion project.
OVERVIEW OF NEW & EXISTING
New home sales came in exactly where they were last year, with no change, but new construction volume did see a 2% increase. Existing Homes Sold has reached a record high with an 8% increase year-on-year. The volume of existing home sales is up 17% year-on-year.
LAFAYETTE PARISH: AT A GLANCE
Here is an overview of the Lafayette Parish Real Estate Market:
2018 is looking like a record year! Sales volume is up 11% or $60 million. Pending sales are up by 12%. The 6% increase in the number of sales in the market is due to an increase in the number of lower priced homes. The 11% volume increase is due to the higher average sale price up 4% to $224,000. May was a record month in volume and sales. Existing home sales are up by 8% in number of sales, but volume is up 17% or $63 million.
Demand exceeds supply in lower price range homes. It is a great time to sell if you are priced under $300,000. Some neighborhoods in the core of Lafayette are lacking supply in all price ranges. Prices under $300,000 are stable (75% of the market). Higher end home owners are moving down and first-time home buyers are buying because of low interest rates and high rents. We are starting to see more upper-end homes selling and the average price is rising.
New construction sales were up by 15% and volume is up by 7% in the first two quarters but slowed down quite a bit in the third quarter.
As a whole, Lafayette’s market is strong, but there are many variables. Let us know where you live and if you would like me to keep you updated on home values in your neighborhood.
As always, if you want to keep a close eye on the market you can always check out our monthly market reports at www.keatyrealestate.com.
I am Jim Keaty with Keaty Real Estate, and, as always, thank you for reading the Market Update!