A recent report discusses the "oversupplied market" or "buyer's market" that appears to be developing as the area approaches the one year anniversary of Hurricane Katrina.

After Memorial Day, Realtor Brooke Arthurs felt the residential real estate market hit the brakes.

“The market really slowed down. People are still listing their houses but there’s much less demand for the properties,” said Arthurs of Latter & Blum Inc. Realtors.

Since this spring and running into the summer, the number of houses for sale in the metropolitan New Orleans area has been outpacing demand.

Hurricane Katrina damaged many of the homes going on the market, but an increasing number of undamaged houses are also being put up for sale.

In June, there were 2,777 homes and condominiums for sale in Orleans Parish, 70 percent more than in June 2005, according to figures provided by real estate company Prudential Gardner Realtors. But the number that has agents concerned is pending sales, which fell 32 percent from 580 in June 2005 to 394 this June. Also, there are twice as many homes selling for $500,000 or higher in Orleans Parish compared to June of last year.

As a result, agents said a “buyers market” might be on the horizon as the simple law of supply and demand takes hold. That means damaged homes already at bargain basement prices might sell for even less as inventory skyrockets, great news for investors interested in renovating.

“I think some sellers are reducing their prices,” Arthurs said.

Buyers market

The gap between the number of homes for sale and demand for those homes won’t stop widening, say industry executives.

“People I talk to in and out of my company think that there will be an oversupplied market. Now, an oversupplied market is also known as a buyers market, meaning buyers have more choices of what they want to buy,” said Rick Haase, general manager of Prudential Gardner.

But, Haase said, the effect of the buyers market could be lessened if too many damaged homes flood the market, “because there’s only a certain kind of buyer that is willing to ... work on a (damaged) property,” he said.

Arthur Sterbcow, president of Latter & Blum, agreed supply has outpaced demand.

“But I don’t see a decreased demand. I see more demand than we’ve ever had. There’s a diminishment in the ratio of supply and demand. The number of people searching for properties in the market is greater than it was last year,” Sterbcow said.

Realtors say average prices are higher than they were this time last year for some metro area parishes.

Sterbcow said in Orleans Parish the average price for the combined sales of single-family homes, condos and small apartment compexes was $243,449 the first six months of this year, up 14 percent from $212,160 during the first six months of 2005. But in eastern Orleans Parish, which was sacked by Katrina, the average sales price has plummeted to $91,533 for the first six months of this year from $121,315 for the same period last year, he said.

Sales volumes soar

Despite more supply than demand, residential real estate companies couldn’t be happier with sales volume, which for most companies is higher than it was this time last year.

Latter & Blum had $878.6 million in sales volume for the metro area in the first six months of this year compared with $655.5 million during the same period last year, Sterbcow said.

Total sales volume for all real estate companies in Orleans Parish during the first six months of this year was $1.2 billion, up 35 percent from $884 million the same time last year, he said.

“I think as more and more homes come on the market that are damaged or distressed, that will drive the average selling price down substantially. But right now it’s still higher,” Haase said.

“What’s happening is the prices that people are paying in communities where they’re buying have escalated more then they’ve fallen,” he said.

Arthurs said “For Sale” signs are popping up across the metro area, from Old Metairie to Jefferson.

“There’s even been a slowdown in the houses that are under $400,000,” she said.

‘Executive exodus’

“I think the doctors are still leaving,” Arthurs said, referring to the loss of medical personnel from the New Orleans area.

Haase has noted the increase in homes for sale for $500,000 on up. In Orleans Parish, the number of those homes for sale this June was 558, double the 280 for sale in June last year. In June, there was 13 months worth of inventory of homes in that price range versus 4.7 months of inventory in June last year. That means if no other homes came on the market, it would take 13 months for the homes currently for sale to be sold.

“That’s a really remarkable increase in any price category,” Haase said. “The increase isn’t coming from a lack of $500,000 homes selling. It’s coming from much more inventory on the market,” he said.

What’s happening, Haase said, is “more people are selling expensive homes than buying them. Does that suggest a bit of an executive exodus?”

Arthurs’ hope is that sales pick up after September, when the peak of hurricane season has passed and homeowners receive federal rebuilding dollars.

For now, agents don’t see a downturn in rising inventory.

“The number of homes coming onto the market has just begun,” Haase said.