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Last week we looked at plummeting home prices as measured by the S&P/Case-Shiller Home Price Index, the index quoted by the national press when describing the housing industry. It looks at repeat sales of individual houses over time and indexes them as a percentage of January 2000 prices. For example, a house that was purchased for $150,000 in January 2000 then sold for $255,000 by January 2006 would have an index of 100 in 2000 and 170 as of the sale date. For the 20 markets tracked, the Case-Shiller index rose from its base of 100 in January 2000 to a peak of 203 in February 2006 before declining to 175 in March 2008. We ended with the question of how applicable the data was to our market.

The Case-Shiller index tracks housing sales in major markets across the country, the closest to us being Dallas, followed by Atlanta, so there is no data from that survey that is directly applicable to us. As a basis of comparison to our results in East Baton Rouge Parish, I took average home sale prices as reported by the Greater Baton Rouge Board of Realtors and indexed them to average prices in January 2000. Please note: these methodologies are not the same and the results should not be compared except to present a sense of the trends. But the differences in trends between the national housing market and the East Baton Rouge market are significant.

While the markets tracked in the Case-Shiller composite index heated up and prices skyrocketed, the average prices in East Baton Rouge showed modest increases. In July 2005 our index was 117, indicating an average annual return of 2.9% since 2000 versus an average annual return of 12.7% for the composite group. As I said last week, it was unrealistic to expect such high returns to continue.

The "Katrina Bump" caused our prices to rise a bit faster for a while until settling into more modest increases in 2007. Some of the increase in average prices is the product of a greater number of higher-priced homes being included in the results, something that is factored out of the composite index, but the trend is there. East Baton Rouge did not have the huge escalations in prices that the other markets had and did not have a downturn in prices when the credit markets soured.

So are we "safe" or are we lagging the national trend?

CNN recently listed Baton Rouge as one of the "10 fastest growing real estate markets in the country," with projected median home price growth of 1.9% over the next 12 months. It may seem surprising that such a modest growth rate would get us this sort of national attention, but as long as employment is strong and we do not overbuild, slow and steady may get us noticed for some time to come.

(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)