RE: Real Estate Podcast

Clint C. Galliano, REALTOR® (00:14)
Welcome to another episode of the RE Real Estate Podcast. I'm one of the hosts, Clint Galliano, and the other host, Ben Harang How you doing, Ben?

Ben Harang, REALTOR® (00:25)
Clint, good afternoon man, I'm doing terrific. How you doing?

Clint C. Galliano, REALTOR® (00:30)
I'm doing wonderful. It's our normal Wednesday time slot and we chugging along.

Ben Harang, REALTOR® (00:37)
Yes, we are. Yes, we are. We're going to continue the mini series, I guess, of buying versus renting. In previous episode, we talked about the benefits of buying, comparing buying versus renting. We obviously think buying is better than renting, but financially, we both think buying is better than renting. Today, we're going to take a deep dive.

into the true cost of home ownership in Lafourche and Terrebonne parishes in particular, Thibodaux and Houma We're 12 miles apart. Like I like to say this, the wonders of technology, Clint's sitting in his office in Houma. I'm sitting in my office in Thibodaux and the wonders of technology bring us together. So it's...

We only 12 miles apart, but they're completely different real estate markets at the moment. so we're going to talk about some of the pros and cons and why, why, why Thibodaux's in a little bubble. Why Houma is more of a buyer's market at the moment. And, we'll, we'll take it from there. So, the median sales price, you know, we talked about the two towns, two different stories.

Um, is declining in Houma by 6.4 % year over year, um, was down 6.4 % to 13.4 % year over year. Um, one of those websites shows a 6.6 drop in the last year. One report lists Houma in the top five cities for the projected price declines.

Clint C. Galliano, REALTOR® (02:18)
Yeah, I saw that.

Ben Harang, REALTOR® (02:18)
Now

we don't like to see that, but it does present some opportunities. One of the things about Houma is the new flood maps and risk rating 2.0. If you get into Houma and you decide that's what you want to do, one thing to look out for is the flood zone.

If you're in a flood zone X and you're not required to buy flood insurance, it's a lot more competitive for that property. If you're in a flood zone, then you need to talk about the cost of flood insurance. You'll need to have a policy on that property as long as you have a government backed home loan.

So that's one thing, one thing you can do to pick out a property in home if that's where you want to be is look at the flood zone and try to, it's not always possible, but try to stay in the next zone if the right house works for you. That'll save you a ton of money on flood insurance.

Clint C. Galliano, REALTOR® (03:21)
And not everything is in an insurance required flood zone. I met with a new client yesterday for a consultation and they told me that they liked this one property and they said the street it was on and I said, I can almost guarantee that that's going to require flood insurance. And I looked at the flood maps.

Ben Harang, REALTOR® (03:43)
Mm-hmm.

Clint C. Galliano, REALTOR® (03:45)
and it and its two neighbors are in flood zone X. It's like this one little pocket where X dips down and everything else around it is flood zone A or AE. And it's like this one little pocket doesn't require flood insurance.

Ben Harang, REALTOR® (03:50)
Mm-hmm.

Mm-hmm. Before.

Right. Before the, before the flood maps and you can, you can correct me if I'm wrong, Broadmoor subdivision and Houma was a hot subdivision. They updated the flood maps and it's like, whoa, pump the brakes. Almost everything in that subdivision is now in a flood zone that requires flood insurance. And it has affected or impacted the prices in Broadmoor subdivision.

Clint C. Galliano, REALTOR® (04:28)
Yeah, it's almost like Alma Street is kind of the dividing line, but it's not the definitive line because they've got fingers of flood zone AE that go closer towards the bayou or towards Park Avenue. And they've got some fingers of flood zone X that go back past Alma. So it's really, it does this number, which makes sense.

Ben Harang, REALTOR® (04:36)
Right.

Mm-hmm.

All right.

And that's why I saying, if you, if you can make that a high priority, don't, don't discount it because it's in a flood zone that requires flood insurance, but make an informed decision. Do not proceed with a purchase on a house that you do not know what flooding flood zone it's in. You need to go into that with your eyes wide open. and so there's no surprises between the purchase agreement and the, the closing.

So that's just, that's from the school of hard knocks and it ha me seeing it happen to people and it's just, it's not fun for anybody when that happens. most people are like me. I just don't like surprises. Give me the, give me the news, whether it's good or bad, just give it to me and I'll process it and deal with it. Just don't hide it and then pop up one day and tell me something you've been knowing about for two weeks. And you just now decided to tell me.

Clint C. Galliano, REALTOR® (05:47)
Yep. So getting back to the inventory and Houma and everything, like you said, there's opportunities for people that want to buy and just be prudent about your approach to it. Moving on to is a website show that

Ben Harang, REALTOR® (05:56)
Mm-hmm.

If

Clint C. Galliano, REALTOR® (06:12)
There's a slight decline in prices in Thibodaux, and I think that tracks what we're seeing in our market reports as far as the market price, median market price. But ultimately, the inventory is a lot lower in Thibodaux. ⁓ And I guess it's,

Ben Harang, REALTOR® (06:28)
Mm-hmm.

Clint C. Galliano, REALTOR® (06:33)
a lot less people want to sell. There's a lot more people in Houma wanting to sell and it probably ties back into our diatribe about flood insurance piled on with any remaining damage from Hurricane Ida and all of that stuff. But it's also, Thibodaux is a smaller market than Houma, like we've said before. So I think all of that plays into it.

Ben Harang, REALTOR® (06:52)
Right.

and. Thibodaux it's, it's amazing if it's priced right, it flies off the market. in Houma, even in, in the flood zones that do not require a flood policy, it, takes a little bit longer. And just because the price is the median price is down, it doesn't mean every house is down. It just means.

The house in the middle is down 2.6 % or whatever it is, 2.3%. There's as many price lower than that house as they are higher than that house. So maybe the higher end houses are not selling. We might have not sold one high end house that month. So the market is really so small that one or two sales does affect it overall. Home was market is

bigger and deeper. but there are people in home of that never didn't have flood insurance and now required to buy flood insurance and now can't afford their house. just over the flood insurance. some people, some people refer to the flood flood insurance premium as your second mortgage on the house that'll live with you into perpetuity.

Clint C. Galliano, REALTOR® (08:04)
Yeah.

Ben Harang, REALTOR® (08:05)
So you just need to, to understand what you're getting yourself into on the front end and not be surprised. And I'm not saying don't do it. Some people say I can afford it. I want to live there. I don't think the house is going to flood anyway. I think the maps are wrong. I'm willing to pay the premium. Go for it. You know, don't not buy it because of that, but make sure you make an informed decision when you do buy it.

Clint C. Galliano, REALTOR® (08:30)
Yeah. And so moving on to the rental market, Houma's rent is average rent for a one bedroom is about $950. And so we say that. I can remember 20 years ago, you could rent a one bedroom, or at least around Thibodaux, probably anywhere for like $200, $300 a month.

Ben Harang, REALTOR® (08:54)
Mm-hmm.

Mm-hmm.

Clint C. Galliano, REALTOR® (08:56)

for a really, really nice one. But the key thing is that it's up almost 2 % year over year. So that's not too bad. That's less than the typical 3 % increase in rent. But then you compare that to Thibodaux, and that's $1,232 per month. And that's up 6.6%.

Now, I don't know if that ties into, you know, I think that's probably including apartment rents. ⁓ You know, I don't think that's got like single family house rents in there, but still, it's eye opening.

Ben Harang, REALTOR® (09:29)
Mm-hmm.

Right.

And again, what, what that tells me is that the rents are going up to pay the landlord's cost of insurance. So the fact that you're not buying a house because of the cost of insurance, you're still paying for the cost of insurance by renting an apartment or a house in, in home or in typical, wherever it is. If you, the flood zone also plays a part.

And the rental, because if it has to, if it's in a flood zone, then the landlord in all likelihood will be required to buy flood insurance. And if you can imagine what a flood premium policy would have flood policy would cost in a 50, 7,500 unit complex. And everybody in that complex is paying a portion of that premium. So you can't run away from it if you're going to live here.

and I rather live here and not have a landlord to call than to live here and have to depend on somebody else to make repairs, pay somebody else's mortgage form. Like we talked about in the last episode, I rather pay on my mortgage. And at some point in the future is paid for. And one day you wake up and you don't have another note to pay 30 years is a long time, but it sure goes by in a hurry.

Clint C. Galliano, REALTOR® (10:58)
That's true. and that ties into, you know, getting to cost of ownership. ⁓ The hidden giant. You know, and it's kind of what we've been talking about this whole episode is that you've got all these ancillary costs involved.

Ben Harang, REALTOR® (11:07)
Mm-hmm.

Yeah, the...

Mm-hmm.

Clint C. Galliano, REALTOR® (11:20)
And

even if you're not buying a home or don't own a home, you're still paying these costs is just reflected in your rent. ⁓ But the...

Ben Harang, REALTOR® (11:28)
Right.

Clint C. Galliano, REALTOR® (11:32)
When we talked in our other episode about when buying a home, a $2,000 a year insurance assumption that was assuming a new construction home in a typical subdivision. So a fairly small home, but still a nice three bedroom, two bath, brand new home.

Ben Harang, REALTOR® (11:44)
Mm-hmm.

Clint C. Galliano, REALTOR® (11:54)
And actually I got quotes in for a home because the client that caused this whole exercise actually wound up writing a contract on a new construction home. So, he looked at the comparisons and his note is going to be really low, much less than what he's paying on his rent.

Ben Harang, REALTOR® (12:19)
Mm-hmm.

Clint C. Galliano, REALTOR® (12:19)
And

so he decided to move forward. fell in love with the house. We got insurance quotes in this morning and it's like $1,350 to $1,485 a year for that house. And that's amazing.

Ben Harang, REALTOR® (12:31)
Yeah. And it's

probably not in a flood zone that requires a flood policy. And then new construction, the homeowner premium will be as cheap as it ever gets. So it'll, it'll bump up over time, but to get started, it's, it's on the very low end of the spectrum. And you can get in the house, have some breathing room and just kind of grow a little older as the, as the premium goes up.

Clint C. Galliano, REALTOR® (12:37)
It's not. Correct.

Now, in comparison, if you're not looking at new construction, you're looking at a resale, then you're looking at much higher insurance costs just for homeowners, even disregarding if you have to have flood insurance or not. ⁓ A different client looking in a different area, this is a one and a half story house.

Ben Harang, REALTOR® (13:15)
Mm-hmm. Mm-hmm.

Clint C. Galliano, REALTOR® (13:25)
And we've got insurance quotes, homeowners insurance quotes from $3,200 to $9,800 a year, depending on if you're going with just bare bones dwelling coverage or if you're going with full replacement coverage. you know, it's like replacement coverage value is like $650,000 and this is on $165,000 listing.

Ben Harang, REALTOR® (13:55)
Well, and also the zip code matters. had somebody a month or so ago at a team meeting talked about, and he couldn't write in 70364, which is on the West main side of Bayou Terrebonne, but he could write in 70360, well, vice versa. So he couldn't write in 60, but he could write in 64 and literally Bayou Terrebonne runs between those two.

Clint C. Galliano, REALTOR® (14:09)
That was 6.0 and in 6.4 he can write, yeah.

Ben Harang, REALTOR® (14:19)
And that's, that's the only difference. so it makes no sense, but those arbitrary lines, if you're not paying attention mean a lot. And that's some of the ways that you can get the price down, and home ownership in generally in Terrebonne Parish and to a lesser extent in Lafourche Parish.

Clint C. Galliano, REALTOR® (14:36)
Yeah. So, and just a reminder, homeowners insurance doesn't cover flooding or flood insurance, you know, we've said it, I don't know how many times about the different policies, but that's kind of a key thing to remember. And risk rating 2.0 is...

Ultimately, it's just ridiculous. They're trying to make this, what did he call it? It's basically a, how did the guy refer to it? It's a,

Ben Harang, REALTOR® (15:03)
Mm-hmm.

So I'm drawing a blank.

Clint C. Galliano, REALTOR® (15:11)
I can't think of the term.

Basically, it's a program to provide relief to people so that if they ever do happen to flood, they've got some, it's a subsidy, really, is what it is. But they're trying to make it act as a commercial insurance program as opposed to continuing to be a subsidy.

Ben Harang, REALTOR® (15:24)
Mm-hmm. Mm-hmm.

Right, right.

And, and you've probably heard me talk about this. If you've seen the episode, when we talked about flood insurance, one of the problems with it is FEMA has decided each state needs to be, needs to stand on its own. So Louisiana has to generate enough premium to generate, to cover the losses. Well, that makes it cost prohibitive. And what they've done is there were a lot of policies in Louisiana that people had that were not.

in a flood zone that required a flood policy. Well, they have successfully running, running virtually all of those off. So they went up on a price in a premium, did nothing, but stay the same or go down. So they have fewer policyholders. The ones they have are at a somewhat higher risk according to FEMA. So there's no law of large numbers, which is insurance is based on to cover the

To collect premium from the people that probably won't flood to offset the losses by the people that will flood. so it's just a, it's a vicious cycle and it becomes more and more, out of line. But in Louisiana, we have like a 95 or 98 % compliant rate compliance rate when a flood policy is required nationwide is plus or minus 50%.

So in Iowa, they say, we're not going to flood. We're not going to worry about that. And they don't buy the flood insurance. and right. Cause the penalty is insignificant. so if they get caught, pay the penalty. So in my, in my mind, that's just that that's having, having a system set up for people to abuse it and get around it with a wink and a nod. Cause everybody knows what's going on.

Clint C. Galliano, REALTOR® (17:02)
and the lenders don't force them to.

Ben Harang, REALTOR® (17:24)
And that would be the solution to the flood insurance problem, I think.

Clint C. Galliano, REALTOR® (17:29)
Yeah, make it a national pool.

Ben Harang, REALTOR® (17:29)
So exactly

do it nationwide rather than by state. Cause how can, how can we do it with 4 million people in California does it with what 30 million, 50 million people? Of course they can do it. We can't do it with 10 % of that.

Clint C. Galliano, REALTOR® (17:42)
Right.

Exactly. All right. All right. So another thing that's changed recently is hurricane deductibles. A lot of times you're looking at a 2 % to 5 % of the home's insured value as a deductible, but we're starting to see some policies quoted with higher deductibles.

Ben Harang, REALTOR® (17:50)
Anyway, I'm off my soapbox. I just stepped off.

Hmm.

Clint C. Galliano, REALTOR® (18:16)
and changes since Hurricane Ida is basically that the, we call it a hurricane deductible, but it's really the wind and hail deductible. It's almost the cost of replacing your roof.

Ben Harang, REALTOR® (18:29)
Right, they virtually took the cost, took the coverage for your roof out of the policy in a hurricane, in a hail storm or a typical thunderstorm if you have roof damage. You go back to your standard deductible, but a named storm peril, a named storm deductible virtually takes out coverage for the roof. And you can now buy a stated value policy, which should lower the premium a little bit. You can also, which also

Clint C. Galliano, REALTOR® (18:53)
I think they said

that was going to be coming out in January.

Ben Harang, REALTOR® (18:57)
So they also are changing the way they cover a roof after a relatively short time once the roof is new, then they start pro-rating what they'll pay you for the roof over the life of the roof. So if it's a 20 year roof and it's 10 years old, they're going to pay you half for half of the roof after they hit you for the deductible. So it just, doesn't, it doesn't make sense.

that you're buying something and the biggest exposure you have is the roof. Cause the roof stays, stays solid. You're not going to have a whole lot of hurricane damage. It's when the roof lets go, everything else is cost. so anyway, I feel like we, we, we running people off, but, we want to be truthful about the true cost of home ownership in South Louisiana.

Clint C. Galliano, REALTOR® (19:38)
Yeah, we ripen.

Yeah. And so the other thing too, that we wanted to touch on is kind of your true monthly cost for buying versus renting. So, you know, Ben said a couple of times here, this episode and the previous one that, you know, you're still paying for your repairs is just that your landlord takes care of it. You're paying it in your rent. ⁓ When you

Ben Harang, REALTOR® (20:08)
Mm-hmm.

Clint C. Galliano, REALTOR® (20:12)
When you're buying a home, typically unless you put a whole bunch of money down, your lender will escrow your taxes and your insurance. And basically that means that they'll collect a 12th of, after your initial purchase, every month they'll collect a 12th of the cost, or estimated cost of your taxes and insurance and collect that along with your monthly note and put that.

portion for taxes and insurance into an account and save it until the bills do so that they've got the money they handle taking care of paying it to make sure that it gets paid. So if anything does happen, they don't have to worry about no insurance or the house being sold at a tax sale. So you might get a quote from a lender at, you know, saying, okay, well, your payments or your notes going to be, you know,

$900, $1,200. And then they may or may not be taken into account typical insurance numbers or they may not be taken into account. That may just be your principle and interest. So, and that's one of the things that at least I like to do is I'll get the insurance estimates, give that to the loan officer and let them work up the closing estimates using those

Ben Harang, REALTOR® (21:09)
Mm-hmm.

Mm-hmm.

Clint C. Galliano, REALTOR® (21:35)
actual quotes so that they've got a better understanding of what that total will be. And then we've got, I guess, a much better base to start out from for making offers and deciding on if they will even want to make an offer on a whole.

Ben Harang, REALTOR® (21:51)
Right. You're starting from a position of, strength through knowledge. ⁓ you know, you, you, you're much more informed than anytime you informed, you can make a better decision on your behalf. so, you know, some people just say, I want to buy that house cause I, cause it's cute. And there's a saying in the real estate world, cute little houses sell. It's all about curb appeal.

Clint C. Galliano, REALTOR® (21:57)
All

Ben Harang, REALTOR® (22:17)
And then reality sets in with the cost of a homeowner's policy, with the cost of flood insurance, if it's required. What's covered under the homeowner's policy that you do buy. You know, because we're in a six to six and a half percent rate, interest rate world now that affects everybody nationwide. It's the insurance costs that affects us disproportionately than

people on the interior of the country.

Clint C. Galliano, REALTOR® (22:43)
Yeah, I mean when Pennsylvania can get insurance for seven or eight hundred dollars a year and we've got people paying, you know, four to eight thousand dollars a year on average.

Ben Harang, REALTOR® (22:55)
But to say seven,

8,000, you know, the, that, that's reflected in the cost of the houses. You know, I'm sure Pennsylvania's median price is not $223,000. It's somewhere north of that significantly. But Pennsylvania still floods. New Jersey took the Sandy, Superstorm Sandy, if you remember, was a nor'easter. They went up the East coast and wreaked havoc.

On the New Jersey shore, nobody had flood insurance. so FEMA came in and gave away money. They come, we don't have flood insurance down here. said, why don't, why don't you have it? You supposed to have it. And they, they harass people and don't help people. so anyway, I told you, I get off my soap box flooding me and flood insurance and I don't get along. If you, if you hadn't noticed.

Clint C. Galliano, REALTOR® (23:36)
Yeah.

Yeah, the feelings are mutual. So, I mean, ultimately, with everything we've discussing, if somebody's not wanting to take responsibility or take control, you can see why somebody would want to rent more than just for a year or two, if they don't want to deal with that kind of stuff.

But again, like we said on the last episode, if that's what floats your boat, go ahead. ultimately, you've got better control and more control when you own your home.

Ben Harang, REALTOR® (24:09)
Mm-hmm.

And some people just don't want to deal with having to fix stuff themselves. They rather have 1-800-LANDLORD call them up and say, your fridge went out. I'm going on road trip. It's going to be fixed when I get back. And they hang up the phone and that's all they do. So, and the landlord may or may not fix the refrigerator or whatever it is that's broken, but you're dependent on him if you're renting him or her. So.

All right. I think we beat that horse enough, Clint.

Clint C. Galliano, REALTOR® (24:49)
Yeah, it's got stick marks all over the place. All right, I think we got another one in the can here.

Ben Harang, REALTOR® (24:50)
Heheheheh Yeah

All right. We enjoyed it, man. It's some good stuff.

Clint C. Galliano, REALTOR® (25:00)
Yes, indeed. So remember to like, share, comment, send it to your friends, subscribe, all the things, and we do that at where?

Ben Harang, REALTOR® (25:11)
At re real estate podcast.com and send it to your mom and send it to.

Clint C. Galliano, REALTOR® (25:17)
RERealEstatePodcast.com

All right.

Ben Harang, REALTOR® (25:20)
All right. Okay. I'm done Clint. Have a good one.

Clint C. Galliano, REALTOR® (25:24)
And

you too. Bye bye.