January 2012 Economy & Real Estate Trends

byWade R. Ragas, PhD MAI

HBA of New Orleans

Expected National Market Trends

• GDP Slow Growth • Housing Prices Continue to Decline 2012• Mortgage Rates Low 4%, Fed Subsidies continue• Inflation in Food, Energy, Imports 3-4%• Deflation for Rents, Real Estate, General U.S.

Merchandise, Exports of U.S. -1 to -2%• Consumer Confidence Low, eratic• European Recession severe and long• Japan Flat +1%; China +6% feels like recession

Metro New Orleans Employment

• October 2010 - 522,500

• October, 2011 - 533,100

• Trend - +10,600 Jobs

• State’ Strongest Job Growth in N.O. Area

• 70,000 Jobs Lost from Old High

October 2011 Unemployment Rate

• New Orleans Metro - 6.4%

• Jefferson - 6.0%

• Orleans - 7.8%

• St. Tammany - 5.2%

• St. Charles - 6.0%

• St. John - 7.7%

• Nation - 8.5%to 10%• New Orleans Attracting Young Households

Metro New Orleans 2000 vs. 2010

-1.3%35.4%160,895162,992Nonfamily Households

-14.7%17.4%79,20190,8233.Female Householder, No Husband Present

-17.8%41.4%188,590222,0732.Married Couple/Husband-Wife Family

-14.1%64.6%294,251335,5951.Family Households

-9.5%100.0%455,146498,587Total Households

Biggest Losses:

HOUSEHOLDS BY TYPE

-12.7%100.0%1,167,7641,316,510Total Population

ChangeShare20102000

Metro New Orleans 2000 vs. 2010

39.8%15.4%83,09350,042Vacant housing units/abandoned

-15.0%36.7%166,912191,913Renter occupied housing units

-6.4%63.3%288,234306,674Owner-occupied housing units

-9.5%84.6%455,146498,587Occupied housing units

-1.9%100%538,239548,629Total Housing Units

HOUSING OCCUPANCY

-3.4%23.4%106,595110,223Households seniors 65 years+

-29.5%32.8%149,362193,407Householder with children under 18

-5.2%28.4%129,051135,781Householder living alone

ChangeShare20102000

Population – Metro Area

• 2005: 1,316,500 • 2010: 1,167,767• Katrina Impact on Population: -12.7% • Job Loss: -12.8%• More Retirees, Shrunken Labor Force• Shift to Tangipahoa and St. Tammany Parishes• Slow Job Growth Determines Population

Growth

Construction Produces Job Loss Floor

• $42.4 Billion in New Construction 2006-2015 (Federally Supported)

• Still To be Awarded or Built $17 Billion (approx.)(as of Dec. 2011)

• Mostly Federally Funded or Assisted• $300-$500 Million a Month in Contracts Until Mid-

2014• Federal Budget Cut Risk is Growing

Metro Total Units & Multifamily Permits

200 plus renovated

591

104

83

305

1,383

2,593

286

105

394

345

877

853

486

Multi

Source: RPA & U.S. Census Construction Reports

2,5002012 (E)

5,045Aug. 00 to 04

2,3212011

2,1712010

2,8322009

4,7892008

7,0242007

5,5342006

4,7812005

6,4002004

6,1292003

5,4142002

4,4572001

4,1832000

Total UnitsYear

Foreclosure Rate Slows

• 2011 7,089 -9.37%• 2010 7,822 +36.25• 2009 5,741 +31.28%• 2008 4,373 +88.8%• 2007 2,316 +217.2%• Source: CityBusiness, Jan 20 2012

Single Family UnitsSt. Tammany, Orleans, Jefferson

2004-2011

Source: RPA & U.S. Census

Outcome Locally: Very Slow Housing Recovery, Except for Orleans Renovations

2008008502012 (forecast)

2137537762011

2748205762010

3509475922009

5658829332008

7981,0261,6312007

7074682,6592006

9124132,4682005

1,1735523,1672004

JeffersonOrleansSt. TammanyYear

New Commercial Development Surge

• Orleans CBD- Multifamily, Rouse, N.O. Center Rebuild, Superdome Renovation

• Hyatt Rebuild & Conference Center, Fresh Market, Domain Properties High Rise & Retail

• Airport Renovation, Port Expansion

• St. Tammany Strong Oil Co. Office Demand (Class A)

• St. Tammany Retail Sales Begin to Rebound

• Walmarts in East New Orleans & Gentilly

• Hospitals – VA, Chalmette,Lake Forest, LSU

Tourism Recovery

• 4 Cruise Ships, Instead of Two as of November 2011• Saenger to Open in Dec 2012 After Being Dark for 8

Years, Construction Started-$50 million renovation• Joy Renovation Complete• Streetcar Expansion on Loyola to Rampart 2012 & to

Elysian Fields and maybe River by 2014• Super Bowl 2013, BCS Championship 2012, Men’s Final

Four 2012, Women’s Final Four 2013, & Sugar Bowl’s• Saints Playoffs?• Redevelopment of Iberville Public Housing to City

Hall/Old Charity Possible with Federal Funding

Housing Prices Per Foot

$92

$22

$66

$110

$77

$100

$84

$99

$39

$141

June 2011

Source: GSREIN MLS Data from New Orleans

Metropolitan Assoc. of Realtors, compiled by RPA

Trend: Back to 2005 Price Level; Bottom Forming

Dec. 2009

$103St. Charles

$21Damaged

$66St. Bernard

$112Plaquemines

$93St. John

$110Jefferson

$94Tangipahoa

$108St. Tammany

$37Damaged

$129Orleans

Multifamily Market Rent & OccupancySpring 2011

91%

79%

87%

87%

91%

97%

Source: Greater New Orleans Multifamily Report

Trend: Absorbing New Units, Losing HH in Kenner, Algiers, E. New Orleans

90%866$1.00$864Overall

82%840$0.98$839Kenner

80%877$0.81$714Algiers & East N.O.

90%988$1.00$987St. Tammany

93%839$0.98$821Jefferson

93%855$1.41$1,208Historic Center

Occupancy2011 2010

Avg. Unit Area

Rent Per Ft

Average Rent

Location

Local Biggest Positives• Federally Supported New Development & Infrastructure—Lots

of Shovel Ready Jobs• New Hospitals for St. Bernard, VA, and East New Orleans, LSU-

5,000+ New, High Paying Jobs by 2014• NUCOR Steel Mill in St. James, Underway, Opens 2013-14• Redevelopment of CBD, Retail and Services on going• New LSU State Medical/Teaching/Research Center plus Tulane

Medical Growth & Cancer Research Center• Currency Weakness and Export Growth Helps N.O. Port• Jefferson Westbank Redevelopment & Huey Long Bridge• Eventual Energy Exploration Expansion- Shale & Gulf

Source: Southern Business Development; Louisiana all time record score in 2011 and top in South 2007,2009, 2010, and 2011---FOUR YEARS IN LAST 5 YEARS.

11.621030Florida17

13.68011Missouri16

15.3558Oklahoma15

21.9405West Virginia14

23.16512Arkansas13

24.819033Virginia12

28.266596Texas11

29.928038Georgia10

40.417027Kentucky9

41.212014Mississippi8

43.420032Alabama7

43.624534Maryland6

47.420531South Carolina5

49.630045Tennessee4

51.946070North Carolina3

59.616523Kansas2

115.449571Louisiana1

*PPMPointsDealsState

Southern Half U.S. Ranked by Investment Points Per Million Residents 2011

Biggest Negatives• U.S. Double-Dip Recession is Becoming More Likely

Fall 2012 to 2013

• Slow Drop in Housing Prices Continues, Foreclosures Spread into N.O. area

• Lack of National Energy Policy to Grow Supply

• Avondale, NASA and MRGO Closures

• Lack of Predictable Growth Engine for National Recovery

• Uncertainty from Obama Healthcare Program

• Federal Election Uncertainty

Presentation By

Wade R. Ragas PhD MAI SRAReal Property Associates Inc.3017 Harvard Ave, Suite 204

Metairie, La. 70006(Office) 504-324-3994(Fax) 504-324-3995(Cell) 504-473-6883