You may recall that my Atlanta Fed colleague Rebekah Durham and I reported on housing conditions in southeast Louisiana in our July 22 SouthPoint post. I recently returned from another trip to Louisiana; this time, my colleagues from the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed invited me to join them as they touched base with real estate contacts in the Acadiana region, which encompasses the city of Lafayette and the surrounding parishes. I’m happy to report that our real estate business contacts were quite optimistic on both the residential and commercial real estate fronts.
Contacts indicated that the Lafayette area has experienced tremendous growth over the past year, thanks in large part to the energy sector. However, they were quick to point out that growth in the energy sector only serves as “four of the cylinders in an eight-cylinder engine,” as they described growth in medical, fiber, technology, and petrochemical fields as other drivers of growth. Business contacts mentioned that several companies are in the process of relocating high-paying executive positions as well as management positions to the Lafayette metropolitan statistical area. This growth has had quite a positive impact on the local real estate markets.
On the commercial real estate side, contacts reported that a fair amount of construction activity is taking place in the industrial and retail sectors, with considerable construction of medical office space also under way. Contacts indicated that this increased construction activity has been steady during the past year and a half and encompassed both existing firms wanting to expand their space and firms new to the area undertaking construction. Commercial real estate brokers expressed little to no difficulty in leasing existing space.
On the residential real estate side, business contacts reported that home sales are up more than 13 percent from a year earlier. Contacts indicated that the jump in mortgage rates seems to have raised demand more than it deterred potential buyers. Though new listings are up more than 17 percent year over year, contacts noted that the months’ supply of homes for sale dropped from 6.5 months to 5.3 months. Moreover, home prices have increased almost 2 percent from a year earlier, according to the Federal Housing Finance Agency’s quarterly house price index.
All said, contacts expect 2014 and 2015 to be even better than 2013 was. They pointed out that these large infrastructure investments by area businesses send a strong signal that the energy sector will not be leaving the area any time soon. As the nearby port expansions wrap up, more rigs come online, and manufacturing and petrochemical plants open their doors, business contacts are confident that an increase in real estate demand will follow.
By Jessica Dill, senior economic research analyst in the Atlanta Fed’s research department