BusinessReport.com

While the nation’s housing market wallows in misery, sickened by the sub prime loan flu, the housing market in and around Baton Rouge seems to have been largely inoculated against the worst of it.

Not that there aren’t a lot of new houses sitting unsold for lengthy periods of time, no less in Ascension Parish, the epicenter of explosive growth in the region. At the same time, the Capital Region Builders Association says worries about overbuilding are overblown.

Even real estate insiders note that housing prices—despite a sizeable inventory—aren’t sinking like one would expect. But no doubt about it, says Cynthia Stafford, broker/owner of East Bank Realty: Residential overbuilding is an issue in Ascension Parish, as new subdivisions claim more and more pasture land.

“There are just new ones everywhere you look,” she says. “New streets being put in. Subdivisions just everywhere. I just don’t know where all these [buyers] are going to come from.”

According to the Multiple Listing Service of the Greater Baton Rouge Association of Realtors, Ascension Parish had 840 new and existing residential listings for January 2008. For January 2007 it was only 680. Months inventory—the number of months it would take to sell all existing inventory at the current rate of sale—grew from 6.13 in January 2007 to 9.40 in January 2008.

Stafford says her business was slow the last quarter of 2007 and into January this year, though that’s not unusual. With residential real estate, the first and fourth quarters are typically the weakest and the second and third quarters the strongest.

With February, she says, things are starting to move again, especially houses up to $220,000. Much above that price range it’s not so hot. Oddly enough, even though inventory is higher than last year and new building continues, home prices haven’t fallen. In fact, the average sale price in January 2008 was slightly higher than the previous January.

That’s totally counter to the national picture, where the real estate slump is exerting heavy downward pressure on home values. Stafford thinks it’s different here due to Louisiana’s relatively low unemployment rate and the fact that interest rates are falling.

“The one thing that makes me feel like we still have a strong economy is our prices have not dropped,” Stafford says.

Sharon Hebert, broker, owner and president of Sharon Hebert & Associates in Gonzales, thinks the parish probably grew too fast. But now permits are down, with more than 3,000 lots developed but unbuilt.

“I don’t know where the people are going to come from,” Hebert says.

Even so, she’s confident people will keep coming. Ascension is still close to Baton Rouge, New Orleans and Interstate 10, and still has good schools—even if overcrowding has become an issue. She sees things starting to pick up again real estate-wise.

“I think it’s going to be a good market this year,” Hebert says. “I’m always optimistic. You have to be in this business.”

Lawson Covington, an associate broker with Coldwell Banker in Denham Springs, says Livingston Parish has seen some overbuilding as well but not as extreme as Ascension. After slower than normal business the last two quarters of 2007, meanwhile, he sees encouraging signs for the coming year. According to MLS data, the Livingston market has 365 houses either new or under construction. Throughout 2007 the parish had a 7- to 10-month supply.

“We’ve still got good bit of inventory, but I think we have a little better balance than a lot of places do,” Covington says. “It seems like we’re not quite as overbuilt. We’ve really seen a real surge since the first of the year. Hopefully any out-of-balance we have is getting corrected.”

He blames last year’s slowdown on major changes in the mortgage industry following the subprime loan disaster. The fact that new home prices haven’t gone down has slowed the slowdown even more, Covington says. One reason prices haven’t come down—on new construction at least—is the high cost of building materials, which has only recently started to come down. Nor is land getting any cheaper.

Covington says that for years homes in Livingston fetched lower prices per square foot than homes in Ascension, but now Livingston is “up where they need to be” and doesn’t want to see them come back down. The building frenzy that produced today’s bloated inventories has cooled off considerably, he notes.

“They’re stopping,” Covington says. “Those builders are not putting the inventory on the ground now that they have been. There’s obviously still construction going on, but not like there was.”

As for East Baton Rouge Parish, there are 898 houses on the market that are new or under construction. There was a 7- to 11-month supply throughout 2007.

Linda Fredericks, president of the Greater Baton Rouge Association of Realtors, says it would be pure speculation to say EBR is overbuilt, despite the inventory data. That’s because there’s no way to know how many buyers may pop up in the near term. Houses are sitting on the market a relatively long time now, though that could change quickly, Fredericks says.

“If we follow the trends it will change,” she says. “We are seeing a lot of active buyers out there now taking advantage of the supply of homes and the attractive interest rates.”

Joseph Didier is president of the Capital Region Builders Association, which represents a nine-parish area. He says most real estate people in the big three—East Baton Rouge, Ascension and Livingston—will tell you their parishes suffer from overbuilding. Inventory listings, meanwhile, would seem to bear that out.

But it doesn’t tell the whole story, he says, noting that “there may be some overbuilding” but population changes since Katrina mean more buyers to mop up excess inventory. Spec-home construction by big national builders, which caught fire after Katrina, has largely tapered off, Didier says. Some of it continues but nothing like it was.

“I think it balances out,” he says. “I think builders who are cautious are going to be fine, and real estate people are going to be fine. If you look at lumber, work force, interest rates—in my lifetime they haven’t been this good. Smart money people are building and buying now.”