Year-in-review: Single-family residential real estate exits 2020 on a roll

Amid low interest rates, the Baton Rouge area saw a healthy single-family residential real estate market throughout 2020, with the number of home sales and median sale prices rising year-over-year and inventory shrinking.

That’s partially because, heading into the year, the metro area already had a relatively strong market. By the end of January, pending sales were up 10% from the year before, while closed sales were up 18%. 

However, once the pandemic entered Louisiana in mid-March, activity plummeted. In April, pending sales were down nearly 26% from 2019 and closed sales were down some 12.8%. 

But the market began to rebound in May, with every month thereafter seeing year-over-year upticks in home sales, as well as (with the exception of June) home prices. The largest of these price increases happened in November, when median sales price jumped from $199,900 to $232,900, a 16.5% increase.

It’s largely due to the fact that the supply of homes on the market has consistently diminished each month compared to the same time last year. The sharpest decline came in November, which saw months supply drop 45.8%, from 4.8 to 2.6.

Consequently, many local real estate agents report 2020 as their busiest year yet. Still, the $1 million-plus market remains stagnant, with potential sellers pulling their homes off the market and sellers sitting on their money.

At the same time, there are signs that homebuilding is increasing. Data from the U.S. Census Bureau shows that year-to-date through Nov. 30, single-family housing in Greater Baton Rouge is up 5% over 2019, though multifamily is down 85%. In total, permits were up 2.5% for the year. 

Is the demand there? Karen Zito, president of the Homebuilders Association of Greater Baton Rouge, thinks so.

“Housing demand is strong heading into 2021,” Zito says. “We’re creating the supply for the demand. Builder sentiment is still high.”

Homebuilders—whose industry was considered essential throughout COVID-19—have grappled with supply chain disruptions, shortages of materials, delayed projects and major hikes in the prices of raw materials, particularly lumber.

“It creates housing affordability concerns,” Zito says. “We’ve had record-low mortgage rates, but in most cases, it’s not offsetting the increase in the cost of building the home, so you’ll save on your mortgage rate, but then there’s several thousands of dollars’ increase on the lumber costs to build your house.”

The issue will be at the forefront of the HBA of GBR’s priorities heading into 2021, says Zito, who is currently talking with policymakers in hopes of changing some of the regulatory costs that come with building a home.