With all the never-ending news about the housing bubble, the record number of foreclosures, and the fall of home prices on a national scale, I can’t count the number of times that I’ve had to explain to my clients that none of this applies here in Lafayette, Louisiana. Real estate is a very local thing and Lafayette has been a different kind of place in the past few years when it comes to housing and housing prices.
If we look at home prices on a national scale since the 1970s, the bubble is obvious. Home prices almost doubled in a 7-year span between 2000 and 2007. Why some thought this would last is beyond me and beside the point. And while homeowners who bought at the wrong time in the wrong area may never recover the loss in the value of their home or investment, it’s easy to see that home prices have already recovered. Home values are now where they would have been had the housing market just followed its natural pace. This is what makes people say that we have hit bottom and that the tide is about to turn.
Now look at the graph I found for Lafayette. There is hardly a bubble in this line.
Here is a closer look at the last 10 years for the city of Lafayette and Lafayette parish. The yellow line shows what home values would have been every year with a 4% appreciation starting in 2002.
Truth is, we did have a little bubble in Lafayette and there was an strong increase in home prices between 2004 and 2007. However, in August 2005, Katrina struck New Orleans and thousands of people relocated here wanting to purchase homes. I like to call it our “justified” real estate boom and as we can see on the above graph, home prices did not get out of hand.
Housing prices are based on supply and demand. When supply is low, as was the case in Lafayette after Katrina, prices do naturally go up. In 2007, housing demand returned to normal in Lafayette and home prices went flat as the market adjusted to its new supply and demand reality. And while the average price of a home in Lafayette did drop slightly in 2008 and 2009, here too, home prices seems to have recovered and be where they would have been without Katrina and a 4% appreciation every year.
The good news is that if you purchased a home in Lafayette at the height of the market in 2007, it is pretty much worth the same today, and not 40-50% less (or more) as seen in other areas.
The bad news is that if you purchased a home in Lafayette at the height of the market in 2007, it is pretty much worth the same today. You can forget about the 4% per year appreciation, at least up to now.
What is surprising perhaps is that even with the influx of people after Katrina, unemployment remained low in our area. When people are working, they pay their mortgages and as a result, the percentage of foreclosures on the market in our area has remained in the low single digits (currently at 3% in Lafayette). Low foreclosure rate = real estate prices stability. It is, I think, safe to say that our prices didn’t fall much simply because they hadn’t risen uncontrollably due to speculation in the first place.
If you are thinking about buying a home or moving up in Lafayette or Acadiana, there may never be a better time to do so. Interest rates are still historically low (with nowhere to go but up), affordability is still at an all time high, and home prices have begun to rise. Contact me today to start your search!