Louisiana Real Estate Market Trends & Analysis


Driven primarily by the energy sector in recent years, the economy of Louisiana has seen modest gains. As a result, the Louisiana real estate market has managed to tread water for the time being. While housing indicators have, in fact, improved, there is still plenty of ground to make up. There is, however, one factor working heavily in favor of real estate in Louisiana: affordability.

With a median home value well below the national average, it is considerably more affordable to own in most of Louisiana than it is to rent. As a result, there is plenty of demand, which bodes well for local real estate investors. Those who get in sooner rather than later may find they are simultaneously able to acquire great deals with attractive profit margins.

The Top Louisiana Real Estate Markets


While the best real estate market in Louisiana is up for debate, here’s a list of the cities investors may want to pay special considerations to:

Louisiana Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Attorneys, Corporate Title Agents
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Judicial
Process Period: 2 - 6 months
Notice of Sale: Sheriff
Redemption Period: None

Taxes

Income Tax: 2% - 6%
Corporate Tax: 4 - 8%
Sales Tax: 4.00%
Estate Tax: No
Inheritance Tax: No
Median Property Tax: 0.18%
Property Taxes by County: http://www.tax-rates.org/louisiana/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,580.00
Transfer Fee: No Fees
Origination Fee: $1,928.00

Overview


  • Median Home Value: $147,200

  • 1-Year Appreciation Rate: +1.0%

  • Median Home Value (1-Year Forecast): +0.3%

  • Median Rent Price: $1,200

  • Price-To-Rent Ratio: 10.22

  • Average Days On Market: 83

  • Unemployment Rate: 4.3% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 4,659,978 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $46,710 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 14.08%

  • Foreclosure Rate: 1 in every 2,329

Median Home Prices In Louisiana


The median home price in Louisiana has been exposed to several volatile shifts in a relatively short period of time. Not unlike every other state in the country, home values in Louisiana prior to the recession were higher than they had ever been. However, the downturn in 2008 caused home prices to plummet. By the end of 2011, home prices were as low as $118,000. It was at that time, however, that the market started to recover. Today, median home values in the Louisiana real estate market are $147,200, or 24.7% higher than at their lowest point of The Great Recession.

To put things into perspective, the median home value in the United States increased 57.6% over the same period of time. The median home value across the United States is now $231,700, which makes real estate in Louisiana relatively affordable. That’s not to say the real estate market in Louisiana underperformed, but rather that the United States (as a whole) had a lot of ground to make up from the latest recession.

Nonetheless, real estate in Louisiana made up a lot of ground since bottoming out in 2011. The Louisiana real estate market has followed national trends for the better part of a decade. Thanks, in large part, to a strengthening economy, increased optimism in the housing sector, and a distinct lack of available inventory, the state has seen eight consecutive years of appreciation. This unique combination of economic fundamentals has ushered in a new age of real estate in Louisiana. In particular, activity remains persistent in the face of increasing prices. More people are inclined to partake in the local housing industry despite years of appreciation. The resulting activity should serve as a catalyst for everyone: buyers, sellers and investors.

Appreciation rates across the country are starting to temper, however. As prices continue to test new highs, there’s very little room left for growth, and Louisiana is no exception. With very little room left for growth, price increases in Louisiana have started to slow down. In the last year, real estate in Louisiana appreciated a very modest 1.0%. Real estate across the country, on the other hand, increased 4.7% over the last year (October 2018 to November 2019). The upcoming year should witness slower appreciation rates, too. Whereas median home values across the United States are expected to increase 3.4%, home prices in Louisiana may only increase as little as 0.3%.

Median Rent Prices In Louisiana


For the most part, rental rates across the United States share a direct correlation with their mortgage counterparts. The higher home prices get, the more residents can expect to pay in rent each month. As home prices inch higher, for example, more people will be priced out of the market and be relegated to renting. Competition for rental units will naturally increase, permitting landlords to increase their rental rates. That said, Louisiana is one of the few state-wide markets that has managed to differentiate itself from national trends. Whereas most markets across the country have seen their rates increase, Louisiana has seen a slight decline in rental listing prices. Today, the average rental listing price in Louisiana is $1,200. No more than eight years ago, however, the average rental listing price was about $1,284 per month.

With a median rent of $1,200 and a median home value of $147,200, Louisiana’s price-to-rent ratio is about 10.22. It is actually cheaper to buy a house than to rent one in the state of Louisiana. Despite nearly a decade’s worth of appreciation and a decline in rental rates, more people are inclined to buy.

Louisiana Foreclosure Trends & Statistics


According to RealtyTrac, one of the country’s most trusted sources of distressed property information, the Louisiana housing market is home to a relatively low number of foreclosed homes. More specifically, the ratio of distressed properties in Louisiana is lower than that of the national average. With approximately one out of every 4,294 homes in some stage of distress (default, auction or bank owned), Louisiana’s foreclosure rate is somewhere in the neighborhood of 2.3%. Across the country, however, one in every 2,453 (4.0%) homes is distressed.

Louisiana’s low foreclosure rate may be attributed to the state’s lower home values. More affordable housing could certainly reduce the number of homeowners who are underwater on their mortgage. Additionally, improvements made to the local economy have helped reduce foreclosures even further. As recently as October, “the number of properties that received a foreclosure filing in LA was 23% lower than the previous month and 48% lower than the same time last year,” according to RealtyTrac.

Despite recent improvements made by the Louisiana real estate market, there are still distressed pockets across the state worth keeping an eye on. Five counties, in particular, have a higher distribution if distressed homes than anywhere else in Louisiana:

  • Caddo (1 in every 1,160)

  • Madison (1 in every 1,663)

  • Tangipahoa (1 in every 1,733)

  • Lafourche (1 in every 2,121)

  • Ascension (1 in every 2,167)


Tax Lien Investing


  • Tax Lien or Deed: Tax Deed and Tax Lien State

  • Interest Rate: 12% plus 5% penalty on TLCs

  • Redemption Period: 3 Years on TLCs

Real Estate Investing In Louisiana


The foundation of every good real estate deal is founded on strong profit margins. Attractive profit margins will dictate not only how much potential a deal has, but also whether or not it's worth pursuing. That said, there’s one place real estate investors in Louisiana should focus the majority of their attention: the distressed property market. If for nothing else, distressed assets traditionally award savvy investors with better profit margins and opportunities than their traditional counterparts. Therefore, Louisiana real estate investors should pay special considerations to the state’s distressed property inventory.

Auction homes, in particular, currently represent the best opportunity for Louisiana real estate investors to secure a distressed property. Making up about 64.9% of all the state’s distressed inventory, auction homes are the most abundant source of distressed assets by a wide margin. Louisiana real estate investors who want to increase their odds of landing a good deal with attractive profit margins should, therefore, attend local auctions to see what’s available.

It is worth noting, however, that an additional 30.0% of the state’s distressed inventory has already passed through the auction process and failed to receive a winning bid. Otherwise known as bank-owned homes, the inventory that failed to sell at auction is now in sole possession of the financial institution that foreclosed on the original loan. Nonetheless, these homes also represent a great opportunity for investors. Instead of paying full price for a home, investors may be able to negotiate a discounted price with the loan originator. Remember, banks aren’t in the business of holding onto assets that aren’t cash flowing, which suggests they would rather sell than hold.

Bank-owned homes and auction homes currently represent the largest ratio of distressed homes in the Louisiana real estate market. However, knowing where to find distressed homes is only going to take investors so far. Once investors locate and secure viable deals, they need to know what to do with them, which begs the question: Which exit strategies are working the best for Louisiana real estate investors? What should local real estate investors do with these assets once they acquire them? After all, there are several options to consider.

Fortunately for real estate investors in Louisiana, the state’s current market environment looks like it is perfectly capable of facilitating three of today’s most popular exit strategies: rehabbing, wholesaling renting.

While prices are higher than they have been since the recession began, long-term rental strategies may award investors with the opportunity to offset today’s acquisition costs with years of cash flow. It is entirely possible to make up for the extra capital it costs to acquire an asset with several years of rental income. If, for example, buyers were to us a 30-year fixed-rate conventional mortgage with a 3.65% interest rate (the average rate for a 30-year fixed-rate loan in Louisiana) to buy a home for $147,200 (the median home value) and put down about $30,000 (20%), monthly mortgage payments would come out to be somewhere around $869. With a median rent price in Louisiana of $1,200, it’s entirely possible for investors to pay off their mortgage each month while pocketing an additional $331. While that may not sound like much at first (and there are other expenses to account for), most rental properties in Louisiana are cash flowing, which means investors have the potential to pay down their mortgages with other people's money. Each payment will, therefore, build equity in a valuable asset.

Louisiana real estate investors more interested in rehabbing will also find the state’s market conditions to their liking — in particular, the demand. Remember, it’s actually cheaper to own real estate in Louisiana than to rent, which has driven more residents to pursue buying options over renting. As a result, investors shouldn’t only be able to acquire relatively affordable assets, but they should also find plenty of demand for their rehab projects. The resulting competition should drive up prices, and inevitably profit margins.

Louisiana Housing Market Predictions


While it’s nearly impossible to predict the exact direction a respective housing market will head, today’s most seasoned investors see the value in making educated guesses. If for nothing else, it is entirely possible to take historical data and apply it to what may transpire in the foreseeable future. In fact, investors with an ear to the ground (listening to what the market is telling them) will be better positioned to succeed in the future.

Therefore, let’s take a look at what is most likely to happen in the Louisiana real estate market sooner rather than later:

  • Investors will remain optimistic over the course of 2020: Louisiana real estate market conditions look as if they will support investor efforts for the foreseeable future. Improvements to the local economy, in particular, should promote healthy activity over the next year, which bodes incredibly well for investors. Not only will more people be looking to buy the deals offered by investors, but the added competition should increase profit margins and viable exit strategies. As long as demand remains intact while prices continue to rise, there’s no reason investors shouldn’t remain optimistic.

  • Prices will continue to rise: Not unlike the rest of the country, prices in the Louisiana real estate market look poised to consider rising. That said, prices aren’t expected to consider rising at their current pace. Real estate in Louisiana should continue to see increases, but at a slower rate.

  • Inventory will remain tight: Inventory levels — or lack thereof — have served to increase prices across the United States, and the Louisiana real estate market is no exception. There simply aren’t enough existing homes for sale in Louisiana to meet the demands of an increasingly optimistic buyer pool. In fact, more people are ready and willing to buy today, but they run into the same problem everywhere: a lack of options. While inventory issues have been addressed, the solutions will take some time until they actually ease the current crisis.

Louisiana Real Estate Market Summary


The Louisiana real estate market has triumphed in spite of several obstacles thrown its way. In particular, economic fundamentals appear to be improving and awarding people with the opportunity to participate in the housing market. Today, more Louisiana residents are able to buy homes, which should spark encouraging activity. Their participation in the market should serve as a catalyst for the rest of the industry, which should continue to improve for the foreseeable future.

Sources:



https://www.census.gov/quickfacts/fact/table/LA/PST045218
https://www.bls.gov/regions/southwest/louisiana.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/la/
https://www.realtytrac.com/statsandtrends/la/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/la/home-values/
https://www.zillow.com/home-values/
https://www.attomdata.com/news/market-trends/u-s-foreclosure-activity-down-24-percent-in-august-2019-14th-consecutive-month-over-month-decline/

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