Local Home Buyers ‘Hit From All Directions’ As Mortgage, Insurance Costs Soar | business news | Business Insurance

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Earlier this year, Gentilly resident Courtney Latiker was excited that she and her two teenage daughters, who live in a rented house in the Milneburg neighborhood, would soon be able to settle into a home of their own.

He found a mortgage lender, signed up for a first-time homebuyer program and previously qualified for a loan. She found a three-bedroom apartment off Hayne Boulevard in New Orleans East that had the features he wanted, including good closets.

Then, a big shoe dropped: “Insurance prices skyrocketed,” he said.

Even though his target home was in a low-risk flood area, Latiker’s buying effort was snagged on FEMA’s new flood insurance rate structure, which increased his projected premium and pushed his total cost over the top. than your lender had authorized.

“The rising costs knocked me out,” Latiker said.

At a time when the most obvious challenge for homebuyers in the New Orleans area appears to be rising mortgage rates, local brokers say several issues threaten to cool what has been a brisk real estate market.

Mortgage rates have skyrocketed, but so have the costs of homeowners and flood insurance in many areas. At the same time, inflation is eating into savings. In all, it has become what one agent called a nightmare situation for residential real estate in the area.

“They’re hitting us from all directions,” said real estate agent Bryan Jourdain.


Realtor Jim Kerrin stands on the back porch of a Mid-City home for sale in New Orleans, Louisiana. On Friday, July 1, 2022. (Photo by Max Becherer, nola.com, The Times-Picayune | The New Orleans Lawyer)

The most recent figures from the Southern Gulf Real Estate Information Network, which tracks regional home sales, showed that homes sold fairly quickly in the 10-borough metro area during May, with homes pulling out of the market. market on an average of 25 days, compared to the previous 35 days. days of the same month of the previous year. This year’s median sales price, through the end of May, is $278,000, about 9% higher than last year.

But the report does not cover June, when the US Federal Reserve’s 75 basis point hike increased pressure on mortgage rates. And a monthly figure offers a warning sign. The number of closures in May fell 7.4% from a year earlier, and closures are down more than 8% year-to-date.

070322 Graph of housing prices in the NO area

Meanwhile, market watchers say some parts of the residential sector have already started to cool down.

David Favret, president of the New Orleans Metropolitan Association of Realtors, predicts that higher mortgage rates “may have a chilling effect” on the market. So far the impact on prices has been limited and he expects a “soft landing”. But he expects the higher end of the residential market to be the first to feel the effect of higher mortgage rates.

“Home prices above $800,000 are starting to decline, so I anticipate we’ll see the impact first in the luxury market,” he said.

insurance fights

Jourdain, a New Orleans agent who recently sold several properties in Slidell, said if higher loan rates are making buyers nervous, insurance costs are making them gasp.

Four hurricanes have made landfall in Louisiana since 2020, producing more than half a million claims. The fallout has put more financial pressure on insurance companies to cover losses. Seven companies with policies in the state have gone bankrupt and about a dozen more have pulled out of the state, leaving would-be homeowners with fewer options and sky-high premiums.

In addition, more than 13,000 people have moved onto the rolls of Louisiana Citizens Insurance Corp., the state’s insurer of last resort that must charge more than private market coverage.

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“I just had a client get a $10,000 homeowners insurance quote,” Jourdain said. Before his client made an offer on the target home, Jourdain met with the existing homeowners and learned they were paying $2,800 a year for coverage.

“I knew the buyer would have to pay more, but I figured the premium might be around $5,000,” he said. “$10,000 is ridiculous.”

For buyers who can afford such surprises, jumps in cost probably won’t come between them and a new home. But for first-time buyers like Latiker and others who must rely on loans to close deals, these unexpected cost increases can kill deals.

Rates go up

While acknowledging that higher interest rates are likely needed to help fight inflation, Jourdain said rates have been rising too fast. “It wasn’t that long ago that some of my clients could get a 2.5 percent mortgage rate, and now getting rates in the 6 percent area is too fast,” he said. “In fact, we had to re-qualify some of our clients (for a mortgage) because the new interest rate took them out of what they could afford.”

Agents acknowledge that past low interest rates couldn’t last indefinitely, but say buyers and sellers alike need a measure of predictability that’s missing in today’s market.


Real estate agent Jim Kerrin returns a key to a safe deposit box after giving a tour of a house for sale in Mid-City in New Orleans, Louisiana. On Friday, July 1, 2022. (Photo by Max Becherer, nola.com, The Times-Picayune | The New Orleans Lawyer)


Real estate agent Jim Kerrin giving a tour of a Mid-City home for sale in New Orleans, Louisiana. Friday, July 1, 2022. (Photo by Max Becherer, nola.com, The Times-Picayune | The New Orleans Lawyer)

“You can work with the system if you know where it’s going, but when rates go up dramatically, that hurts people in a lot of ways, and not just homebuying,” said Jim Kerrin, a real estate agent with Latter & Blum in New Orleans.

Kerrin points out that everyone is dealing with higher costs for food, transportation and services stemming from rising inflation.

Additionally, many Louisiana residents will soon face higher electric bills due to Entergy Louisiana’s recent rate increase. And Orleans Parish homeowners may see higher property taxes as a one-year reduction related to last year’s Hurricane Ida expires and many homes return to their pre-Ida assessments.

Difficult for newbies

Belle Chasse agent Bonnie Buras, who calls the triple whammy of mortgage rates, flood insurance and homeowners coverage “a nightmare,” said buyers who really want to move are finding ways to do so.

She points to a couple she worked with who had written six different offers but couldn’t get a house because the offers had to be based on them selling their existing house.

“They eventually sold their house and moved in with their son,” Buras said. “Then they were able to make a cash offer on a new purchase, and we got them a house.”

But for buyers who don’t already own a home, the situation can be more difficult. Kerrin noted that in the past, first-time buyers often found buying a double a good way to break into the market, because they could live on one side of the house and use rental income from the other side to cover their monthly note. .

“Last year people were doing that like crazy,” he said. “But now that (interest) rates are through the roof and insurance is so high, they can’t qualify for those homes anymore.”

Still, Kerrin said prospective buyers shouldn’t give up on their dream. “It may take a while for the market to stabilize, but there is going to be another deal around the corner,” she said. “You can’t just hibernate for six months, because you might miss something; you have to keep looking, keep an eye on what you qualify for and be more realistic.”

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