Baton Rouge housing surge expected to continue into 2021; Can supply keep up with demand?

The number of homes sold in metro Baton Rouge during 2020 topped even the numbers posted in 2005, when Hurricane Katrina caused a rush on housing. And local real estate agents said they expect sales will remain strong in 2021.

Buyers face a home inventory driven down to a 2.4-month supply and a median price that is up 6%.

BY DAN SWENSON | Graphics Editor

Joanna Arnold, of Keller Williams Realty Red Stick Partners, said for the month of January she put $3 million worth of homes under contract that are set to close in March. Arnold, who has been selling homes for almost five years, said that was her best month ever.

"In December, I did $1.8 million in sales, which is crazy," she said. "You don't sell a lot of houses in December and January."

Sustained record low interest rates have been driving much of the sales activity. Mortgage buyer Freddie Mac reported the standard 30-year fixed rate mortgage was 2.73% nationally last week, compared to 3.45% a year ago.

But Arnold said the coronavirus pandemic also has been a factor. People are saving money because they aren't taking vacation trips, going out to eat or driving as much.

"People are using that money toward making a down payment on a home," she said. "They've had all that time to get their credit together, pay down some bills, lower their debt-to-income ratio. They've come out of this in better shape than they came in."

In 2020, there were 12,498 homes sold, according to figures from the Greater Baton Rouge Association of Realtors' Multiple Listing Service. That's a 14.4% gain over 2019, when there were 10,929 sales in the nine-parish area. In 2005, there were 11,291 sales because of all the people who were displaced from New Orleans by Katrina. 

December saw a 34.5% increase in sales over December 2019 and marked the seventh month in a row the number of houses sold increased by a double-digit percentage. For the year, sales in the three major parishes were up 21.6% to 2,620 in Livingston Parish; 12.9% to 2,281 in Ascension Parish; and 12.6% to 6,383 in East Baton Rouge Parish.

Scott Saporito, president of the association's board of directors, said the biggest issue right now is the dwindling supply of homes on the market. At the end of the year, there were 2,641 houses for sale, a 37% drop from the 4,208 homes on the market in December 2019.

"That's the worst thing for me," he said. "What's it going to take to get out of that?"

Saporito blames the lack of inventory on economic uncertainty. While the number of people buying homes has gone up to take advantage of record-low interest rates, fewer people are putting their houses up for sale.

"Because you have this job uncertainty, people are saying this is not the time for us to increase our mortgage," he said. "So they've stayed put." Also, the inventory shortage means potential sellers have fewer options to choose from.

The hope is as coronavirus vaccine distribution rolls out further, people will feel more confident about their jobs and will be willing to take a chance on putting their home up for sale, he said.

The inventory shortage has created such a strong demand, agents have reported cases of clients getting multiple offers on their homes within a day of the property going up for sale.

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"In general, anything under $250,000 sold really well — homes that are priced around average or below average," Saporito said.

The median sales price for a home in metro Baton Rouge rose 6.3% from $207,000 to $220,000 during the year. That means half of all houses sold for less than that amount, half sold for more.

Faith Sherman, one of Arnold's clients, said she looked for houses for six months before finding a home in Copper Mill subdivision in Zachary. She closed on the purchase Friday. 

For Sherman, the issue wasn't limited inventory, but the asking prices.

"I was looking in Zachary and Baton Rouge, but I thought all the houses I saw in Baton Rouge were a bit pricey," she said.

After working with Arnold for about a month, she found a home in Copper Mill with an asking price of $279,000. "It was exactly what I was looking for at a great price," she said.  

The National Association of Realtors said there were 5.5 million home sales in 2020, the best year since 2006. Lawrence Yun, the chief economist for the organization, told The Washington Post he expects 2021 will be even better, with new home sales going up by 21% and existing home sales increasing by 9%. Yun predicts home prices will go up by 3% nationally.  

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Low interest rates and an improving economy are expected to drive the housing market. The NAR is projecting a 30-year-fixed rate mortgage will average around 3% and unemployment will dip, going back to 6.2%. In December, the national unemployment rate was 6.7%, while the Baton Rouge-area jobless rate was 6.1%.

Stephanie Gill, an agent with Re/Max Professional in Baton Rouge, said 2021 is off to an excellent start. "I'm getting calls daily from buyers, sellers and investors," she said. "I've been showing houses at a higher rate than in the past."

One sector of the market that has slowed down are houses in the $500,000 to $800,000 range. That market has been hit by a lack of inventory and buyers wanting to stay put. "They're at a place in life where they've got kids and good jobs," she said. "They are sitting tight until COVID levels off a little bit."