Baton Rouge home prices up 31% since pandemic

Houses in Baton Rouge currently cost 31% more than they did during the pandemic, according to data presented Wednesday.

Danushka Nanayakkara-Skillington, assistant vice president of forecasting and analysis for the National Association of Home Builders, delivered the findings to the Home Builders Association of Greater Baton Rouge. She identified regulatory charges as a primary obstacle in the current housing market.

NAHB data indicates that regulatory costs average $132,000 per new home. This figure represents approximately one quarter of the total construction cost. These charges are 40% higher than the average regulatory costs recorded five years ago.

The breakdown of these expenses shows that changes to building codes account for the largest share at about $40,000. Fees paid by builders after purchasing a lot total around $20,000. Zoning approval applications can add another $7,000 to the price tag.

Nanayakkara-Skillington stated that building at these levels is nearly impossible when regulation costs alone reach $132,000. She noted that broader economic conditions, including the war in Iran and rising commodity prices, have further complicated the environment for home building and buying.

The association forecasts that single-family home building will decline by 4% by the end of the year. No increase is projected for the next two years. Nanayakkara-Skillington pointed to a national housing unit deficit of 1.5 million, which requires the construction of more than 1.1 million homes annually to remedy.

Mortgage rates surpassed 7% last month. Nanayakkara-Skillington expects rates to settle around 6%, marking a departure from the 2% to 3% rates seen during the early pandemic period. She observed that demand remains fair, particularly from millennials, while Louisiana and East Baton Rouge Parish experience population growth despite slowing national trends.

Labor shortages are exacerbating the supply issues. Residential construction lost 50,000 workers in the past year, while non-residential construction added 100,000 workers, largely due to data center projects. Scott Bardwell, owner of Bardwell Homes, described local demand as moderate. He noted that recent sales are driven by life events such as moves, deaths, or divorces.

Bardwell expressed optimism about the local market due to job growth and an aging housing stock. Matt Holmes, general manager of Holmes Building Materials, said lumber costs have not significantly impacted building expenses, though manufactured materials contribute to unaffordability. Holmes noted that inventory levels for spec homes appear high relative to current growth.