It was a near record-breaking year in residential real estate - and an extraordinary year for new construction in Lafayette Parish.In 2012, our local real estate market had a seismic shift and surged forward unexpectedly. I've been reflecting on what I learned from this shift and what caused it. Just 12 months ago, virtually all of the primary drivers of the real estate market were exactly as they are today. Home availability, home pricing, interest rates and loan qualification requirements were the same a year ago. But in 2012, homebuyers in Lafayette Parish came out in droves.
The homes they purchased add up to just under $100 million more than in 2011 ($525 million in 2012, compared to $427 million in 2011). That's a 23 percent increase in sales, making 2012 the second-best year ever in the history of the Lafayette Parish real estate market. (It was also the third-best year ever for new home sales.) All sales are closed, so those are final numbers. The only mystery remaining is why.
While our market did not decline like many others around the country, there was certainly a lull from 2007-2011. Most purchasers were first-time homebuyers driven by necessity. Others were on the sidelines watching the terrible national economic news and staying put through uncertain times. I have to believe that this four-year period created pent-up demand that was unleashed in 2012.
I also believe that increased confidence in the local economy, combined with that pent-up demand and incredibly favorable real estate fundamentals, all came together to create the record activity in 2012.
New construction certainly contributed to this. Last year in the parish, new home sales increased by a whopping 37 percent ($179 million in 2012 compared to $130 million in 2011), compared with the 23 percent increase for all sales in the parish (new and existing).
The influence of national and regional building firms is part of the story, as is what local builders did to compete. In answer to large-volume builders entering the market and offering extremely low prices combined with prepackaged financing, local builders began piling on the features.
Don't be surprised to find outdoor kitchens and fireplaces, the latest in flooring and countertops, multiple ceiling treatments and walk-in showers in homes priced under $250,000. These features usually reserved for homes in much higher price ranges are the point of differentiation between local builders and the national competition.
Ranked in order of total sales, the top new home subdivisions were those that catered primarily to the "under $200,000" price range.
Only one subdivision - Grand Pointe - had an average sales price over $200,000 in the Top 5 new construction subdivisions.
In looking at our entire subdivision list, including more than 240 in Lafayette Parish, River Ranch is at the top, followed by Le Triomphe, Greenbriar, Walkers Lake and Fernwood.
With all of this exceptional activity, the average price of a home in Lafayette Parish barely budged in 2012. In 2011, the average price was $199,750; in 2012, it was $200,445. Home prices generally fall much quicker than they rise, but looking ahead there is already upward pressure on prices. I would expect a full transition from a buyer's to a seller's market sometime this year.
Also look for more move-up buyers and activity in the mid- to upper-price ranges to increase, as more purchases are now driven by desire rather than need. You can bet on new inventory in higher price ranges from builders as they react to new demand. The rush into homebuilding projects will most likely create an oversupply of new homes on the market to choose from.
Acadiana and South Louisiana are in an enviable position. We are in a thriving economy where opportunity abounds and interest rates have been driven to historic lows. I'll be keeping an eye on the continued recovery of the national economy, interest rates and local oilfield activity to see how they affect the market, but no matter what happens in 2013, it looks to be another great year to live in Lafayette.
Steven Hebert has been in real estate and construction all of his life, having begun cleanup work on his father's construction sites at age 6. He is now the COO of Coldwell Banker Pelican Real Estate, a nationally franchised, full service real estate firm.