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 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:
Unemployment Rate: 4.8% (latest estimate by the Bureau Of Labor Statistics)
Population: 4,624,027 (latest estimate by the U.S. Census Bureau)
Median Household Income: $49,469 (latest estimate by the U.S. Census Bureau)
Total Foreclosures (Q3 2021): 572
Louisiana Median Home Prices
The median home value in Louisiana is about $201,414. At its current level, the state's average home price is testing new highs with each passing month. However, it is worth noting that recent appreciation is nothing new to local residents. For the better part of ten years, home prices have increased year over year. Since home prices bottomed out during The Great Recession in 2012, the median home value in Louisiana has increased somewhere in the neighborhood of 37.3%. To put things into perspective, the median home value in the United States has increased 99.8%.
Appreciation in Louisiana has trailed most of the country over the last ten years. Even in the last 24 months, when the median home value in Louisiana increased 16.1%, the median home value across America increased 29.7%—nearly twice as much as the Louisiana real estate market. The difference is noticeable and unlikely to change moving forward. If anything, the disparity is expected to grow even more. Forecasts suggest the median home value in the U.S. will increase 17.3%. Louisiana, on the other hand, isn't expected to surpass last year's numbers, which came in around 11.8%.
The Louisiana housing market hasn't been able to keep pace with national appreciation trends, but the state's lack of price increases may be a blessing in disguise. While many states are appreciating at historic levels, residents are finding it prohibitively expensive to own just about everywhere. On the other hand, Louisiana may be able to use its relative affordability to spur more buying activity. As a result, the Louisiana real estate investing community may be able to capitalize on today's prices; while they are historically high, they may have more room to run.
Louisiana Median Rent Prices
The Louisiana housing market's latest increase in home values has impacted the local rental market. If for nothing else, higher home values and a lack of listings have prevented a large population of prospective buyers from participating in the market. As a result, many people want to buy but can’t, which lends itself to another issue: the same supply and demand crisis facing would-be buyers is impacting renters.
Since more people are priced out of the buying market, we see more renters than average competing over fewer available properties. Landlords have found themselves in a position of power in Louisiana, and their asking prices reflect as much.
According to the latest data released by Apartment List, the median rent in Louisiana has increased 13.9% in the last year and now sits around $1,003. The latest increase in rents has outpaced home value appreciation over the last year. As a result, we may start to see rent increases temper as home values catch up. For context, the national average rent price is about $1,312, or 30.8% more than the average renter pays in the Louisiana housing market.
Here's a look at what renters can expect to pay in the Iowa real estate market today:
Louisiana Foreclosure Trends & Statistics
According to ATTOM Data Solutions’ latest Foreclosure Market Report, "there were a total of 45,517 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — up 34 percent from the previous quarter and 68 percent from a year ago."
Foreclosure filings are up across the entire country, and the Louisiana housing market is no exception. With moratoriums and foreclosure forbearance programs expiring, distressed homeowners are no longer protected. In Louisiana, a total of 572 properties entered into the fourscore process in the third quarter of 2021; that's 2.9% higher than the previous quarter and 1.4% higher than the same period a year earlier year.
Foreclosures in Louisiana are increasing, just like everywhere else. In the last year, foreclosure rates have ticked up modestly, and it looks like they will continue to do so. As more and more banks are allowed to initiate the foreclosure process, the number of distressed homeowners across the state is likely to increase. That said, now is the time for real estate investors in Louisiana to start lining up financing. Immediate access to funding could simultaneously enable Louisiana real estate investors to help distressed homeowners secure a deal.
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
Louisiana Real Estate Investing
The Louisiana real estate investing community has done well for itself dealing in distressed inventory. Coincidently, foreclosures offer the best profit margins. However, perhaps even more importantly, distressed property owners are typically more likely to sell. As a result, Louisiana real estate investors should pay special considerations to delinquent homeowners; that way, they'll increase their odds of landing a deal with better profit potential.
With foreclosures in Louisiana up slightly year over year, local investors should find that the number of distressed opportunities will increase throughout 2022. Despite the increase, however, profit margins are still prohibitive. As a result, investors will need to have a backup plan.
The Louisiana real estate market currently favors just about every exit strategy: wholesaling, rehabbing, and renting. That said, one strategy seems more viable in today's market than any other: long-term rental properties.
Most notably, investors can help offset high prices with attractive borrowing costs. As recently as the first quarter of 2022, the average commitment rate on a 30-year fixed-rate loan was 3.45%. While up year over year, today's rate is historically low and represents an excellent opportunity for Louisiana investors to increase cash flow and offset higher acquisition prices. At the very least, the less money rental property owners have to pay towards their mortgage each month, the more they can pocket from incoming rent.
In addition to lower borrowing costs, Louisiana's price-to-rent ratio is 17.48. At that level, it's slightly more affordable to rent in Louisiana than to own real estate. The state's price-to-rent ratio will drive more people to become renters; houses are too expensive for many to even consider buying. The lack of affordability driving people to rent will increase demand, and landlords will be able to increase asking rates and mitigate the risk of vacancy.
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:
Borrowing costs will increase: To combat inflation, the Fed has announced it will increase interest rates several times throughout 2022. Already at 3.7%, interest rates are up year to date. However, the first official increase has yet to happen. Expect at least two rate hikes this year and perhaps as many as four or five. The increase in rates should prompt buyers to act sooner rather than later, which may even increase prices more than expected.
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 rise at their current pace. Real estate in Louisiana should continue to see increases, but at a slower rate. With borrowing costs increasing and more inventory expected to be brought to market, it's safe to assume appreciation will temper. Therefore, expect home values to increase somewhere in the neighborhood of8% to 10%.
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 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 ease the current crisis.
The Louisiana real estate market has triumphed despite 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 can buy homes, which should spark encouraging activity. Their participation in the market should catalyze the rest of the industry, which should continue to improve for the foreseeable future.
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