How Will Interest Rates Affect The Housing Market On The Northshore and The Greater New Orleans Area?

I’ve been selling real estate for 21 years, and I’ve worked through a lot of different markets. One thing I’ve learned is that people eventually adjust to the market they’re in.

When mortgage rates went over 7% in 2023, buyers weren’t ready for it. We had just come through several years of extremely low rates, and buyers had gotten used to hearing about 3% and 4% mortgages. Suddenly seeing a rate starting with a 7 changed the payment considerably, and a lot of buyers decided to wait.

I don’t think buyers will react exactly the same way this time.

We’ve been dealing with higher interest rates for several years now. Most buyers I talk to aren't sitting around expecting 3% rates to come back. They may not like today's rates, but they're starting to understand that this may simply be the market we're in for a while.

That doesn't mean going over 7% won't affect the market. It will.

The biggest issue is the monthly payment.

Take a $300,000 mortgage as an example. At 6.5%, the principal and interest payment is around $1,896 a month. At 7%, it's about $1,996. At 7.5%, it's approximately $2,098.

Now add homeowners insurance, property taxes and possibly flood insurance. Here in Greater New Orleans and on the Northshore, those additional expenses can make a big difference.

So when rates move up, I don't think buyers necessarily stop buying. Some will, but I think more buyers will simply adjust what they're willing or able to spend.

Someone who was looking at a $350,000 house may start looking closer to $325,000. Another buyer may need the seller to help with closing costs or an interest-rate buydown. Someone else may decide they're willing to buy, but only if they find a house that's priced right.

That's where I think today's market is very different from a few years ago.

Buyers have choices now.

When buyers have several homes to choose from, they're going to compare price, condition, location and, most importantly, what that house is going to cost them every month.

This is also why I think sellers need to be realistic about pricing.

A good house that's priced correctly can still sell. If the same house is priced $20,000 or $30,000 higher than buyers think it's worth, they're probably going to move on to the next one.

I've seen sellers focus too much on what their neighbor sold for, what they paid for the house or what they need to get out of it. Buyers don't really care about any of those things. They're comparing your house to everything else they can buy today.

That's the market.

So have buyers finally accepted 6% and 7% mortgage rates?

I think a lot of them have.

People still have reasons to move. They get married, have children, change jobs, relocate, need more room or decide they don't need as much house anymore. Renters still decide they'd rather own. Those things don't stop happening because mortgage rates went over 7%.

What has changed is how carefully people look at the numbers.

A few years ago, buyers spent a lot of time talking about the price of the house. Today I hear much more discussion about the payment.

That's why I don't think Greater New Orleans suddenly comes to a stop if rates move above 7%.

I do think it slows down.

We'll probably see some buyers step back, especially buyers who were already at the top of their budget. The buyers who stay in the market will probably negotiate harder and be more selective.

That doesn't necessarily make it a bad market.

For buyers, a slower market can actually create opportunities. There may be less competition for a house, more room to negotiate and more sellers willing to contribute toward closing costs or an interest-rate buydown.

Sometimes getting a seller to contribute $10,000 toward a buyer's financing can help that buyer more than simply reducing the sales price by $10,000. It depends on the loan and the buyer's situation, which is why we always need to look at the numbers.

For sellers, the message is pretty simple.

There are still buyers out there. You just have to give them a reason to choose your house instead of the five or ten other houses they're looking at.

Price it correctly. Make sure it shows well. Take care of the obvious problems before putting it on the market. And understand that you may have to negotiate.

I don't like telling people, "Now is the best time to buy," because that isn't true for everybody.

If you're financially ready and find the right house at the right price with a payment you're comfortable with, then it may make sense to buy. If the numbers don't work, don't force it.

The same goes for selling.

If you're thinking about selling, you need to know what buyers are actually paying in your neighborhood today, not what homes were selling for two or three years ago.

That's especially important right now in Slidell, Mandeville, Covington, Madisonville, Hammond, Metairie and New Orleans because these markets don't all behave exactly the same way.

Louis Stall and I work throughout the Greater New Orleans and Northshore markets. If you're thinking about buying or selling, we're happy to look at your situation, go through the numbers and tell you what we're seeing.

No sales pitch. Just information that can help you make a better decision.

Sam Schulz, Associate Broker/REALTOR®
985-503-2741

Louis Stall, REALTOR®
504-259-1971

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