Historically low inventory levels in the Capital Region mean prospective homebuyers must act quickly and be willing to pay more
Donna Wolff, a Realtor with RE/MAX Louisiana and former president of the Greater Baton Rouge Association of Realtors, says the entire Capital Region is being pushed into seller’s market territory due to a 12-year low of inventory. Photography by Brian Baiamonte
Joe Maggio had been shopping for a house in Baton Rouge since February, hoping for something in Mid City or downtown. In late July, his agent called his attention to a Capital Heights duplex in good condition and in his price range of roughly $175,000 to $225,000.
“She was very adamant that I look at it as soon as possible,” Maggio says. “I think they had already had one offer, and it was just listed that day, and I know they had a couple other people lined up to look at the property after me.”
Maggio wanted the house, so he didn’t take any chances. That very evening, he made an offer that he says was about $12,000 above the asking price. The sale closed on July 29.
In today’s Capital Region housing market, savvy buyers should be ready to follow Maggio’s example and act quickly, agents say.
“The whole region is going into a seller’s market,” says Realtor Donna Wolff of RE/MAX Louisiana.
Early this year, the region’s residential housing market hit a 12-year low for standing inventory, brought on by a combination of strong demand and fewer sellers, according to the annual Baton Rouge TRENDS real estate report. Only 3.1 months worth of inventory was on the market, compared to 4.5 months the previous year. A market where it would take six months to sell all the available inventory is widely considered to be balanced between buyers and sellers.
By the halfway point of 2016, the regional inventory had increased to a 3.9-month supply, but that’s still 22% less than this time last year, according to the Greater Baton Rouge Association of Realtors. New listings were down 8.5%.
Low inventory is starting to squeeze sales, which were down 3.7% in June from the same month last year—year-to-date, sales are up 7.1% through the first half of the year—while many sellers are getting a higher percentage of their asking price, says GBRAR spokeswoman Saiward Hromadka. The median sales price was up 3.4% in June to $197,025.
Wolff says Ascension Parish has been a seller’s market for about three years, and Hromadka says it’s now “deep in seller’s territory” at 2.6 months of inventory in June, down 25.7% from a year ago. Livingston and East Baton Rouge parishes—the other main drivers of the eight-parish Capital Region market tracked by GBRAR—are feeling the squeeze now, too, and are at 3.4 months and 3.8 months, respectively.
So why is supply not keeping pace with demand? The most obvious factors that motivate buyers are a reasonably strong economy and low interest rates. However, the TRENDS report suggests the energy sector downturn is discouraging sellers, because “people don’t make a move, unless they absolutely must, when the future of their job is questionable.”
A lot of people have also refinanced their homes recently, notes David McKey, a broker/owner with Coldwell Banker One. They paid upfront costs to do so, and now they have a better rate and lower note.
“So there’s not as much motivation to put their house on the market,” he says. “I think that has a little bit to do with it.”
Construction slowed down after the recession and perhaps hasn’t quite caught up with demand, McKey says. But the pace of construction has picked up in recent years as national builders have moved into the market, he adds, so he doesn’t see a shortage of new houses as a major factor going forward.
After the post-Hurricane Katrina building boom ended, new construction dropped off dramatically, says GBRAR President Tiffany Palmer. It’s picking up again, she says, but those houses are going fast.
The regional housing market isn’t as tilted toward sellers as it was immediately after Katrina, of course. But Palmer says it’s clearly as much of a seller’s market as we’ve seen since.
Houses under $300,000 that are priced appropriately are going fast, agents say. Highland Road, the Garden District, Old Goodwood and Southdowns are mentioned as high-demand neighborhoods. Realtor Linda Gaspard of The Gaspard Team doesn’t find the inventory to be all that tight compared to the past couple years. She says anything under $200,000 or so is scarce, but says there are “plenty” of options at the $350,000 level and above.
“I would call it more of an even market, rather than a buyer’s or seller’s market,” Gaspard says. “In a typical seller’s market, you’re going to see a lot of multiple offer situations, and we’re not really seeing that.”
While homes tend to go quickly in some pockets around town, says Realtor Pat Wattam of RE/MAX First, there is currently a shortage of homes in the $150,000 to $225,000 price range. It’s hard for many local builders to make a profit at that level, but the larger volume builders are working to fill the gap.
“We have price ranges where there’s very low inventory,” she says. “We have other price ranges where there’s lots of inventory, and houses aren’t moving as quickly.”
Wattam is seeing multiple offers for some houses, but that always happens from time to time. Buyers are still picky about the condition of a house, she says, which you might not expect in a tight market.
“Those houses that are really in good shape and well done, they’re going to get top dollar, and multiple offers, usually,” she says.
Though prices are creeping up, Wolff doesn’t see much potential for a bubble. Sellers are pricing appropriately, she says, and appraisers are making reasonable estimates, keeping prices in check.
Wolff says more homes in high-demand locations have been getting multiple offers during the past several months, but she’s not seeing “crazy” bidding wars where someone pays $50,000 over list price. Still, she recommends serious buyers get their financing lined up, stay proactive and be ready to pull the trigger if they find a house they love.
“The buyer has to be ready to write the offer,” she says, “or it’s going to be gone.”