Home appreciation and Income Decline

Abstract

Using analytical housing and income data from FRED, the Breau Labor statistics, Neils burg and Redfin. This paper analyzes how price appreciation of homes compares to income growth across Louisiana. Evidence from the data suggests that rapid price appreciation in certain Louisiana neighborhoods has outpaced income growth, declined affordability, and limited the pool of qualified homebuyers. Past research predicts that income growth in Louisiana is similarly relative to other states and suggests that the housing trends are relative to demographic factors and market conditions. Similar to the data we’ve found here with findings and data tables that show which direction the Louisiana housing market is heading.

Previous Research Findings

Previous research on the Louisiana housing market and economy highlights that there is price variation in different parts of the state by parish. During the analysis conducted by Kennedy,G.A, the author of “A spatial analysis of variation in rural real estate prices across homogeneous land market areas in Louisiana”, evaluated the price variations by comparing price differences to physical characteristics, economic development factors and a way of analyzing how the data he collected behaved over time. The analysis showed that there was a difference in prices based on parishes, and that every section of land is unique. The regreession table illsturated how different characteristics on the land, improved the price of the land. There were findings that showed larger acres of land sold for less when converting to per acre. This completed analysis, done in 1995, links directly to the findings in this analysis. This analysis discovers how the rate of inflation and economic development factors in Louisiana, links directly to home appreciation and affordable housing.

The Housing Market in the United States

Housing affordability in the United States has been one of the leading factors in economic growth and decline. The housing market affordability affects citizens’ ability to spend disbursing income elsewhere on goods and services, which directly impacts the growth or the decline in the gross domestic product (GDP). The GDP has grown over the years of 2010-2025. According to National Association of Realtor (NAR), 18% of growth was influenced by the real estate industry, which creates a need for government funding and regulatory practices. The United States of America’s government has protected the real estate industry by funding government- sponsored enterprises (GSE) like Fannie Mae (Federal National Government Association), who help banks by providing funding for mortgage loans and Freddie Mac who make the ability to purchase a home for middle-low class Americans’ possible. The US government has also supplied government backed loan programs like United States Department of Agriculture (USDA) loans which supplies funding for low-income citizens as well as citizens who reside in rural area. Properties and home buyers that qualify for rural development loans do not require a down payment. This helps qualify home buyers who may not have had the ability to purchase a home otherwise. The United States department of affairs backs the veterans affairs loan allowing veterans the ability to obtain home ownership with no down payment. However, despite the government’s efforts to increase housing affordability by changing the down payment amount and providing programs to assist home buyers, the gap between price appreciation and household income continues to widen.

Affordability In Louisiana

The terms of affordability in different parts of the country vary by the indication of the median salary in each state. In states like New York, we see that their median income growth over the years from, 2010-2023 reflects an 8.59% growth; the state of Texas shows a 9.38% growth, while the state of Louisiana effectively shows a –1.59% decline for the same period. This reflects and shows that the median income of Louisiana did not grow at the pace of other states or inflation. The impact of negative income growth influences what citizens of Louisiana do with disposable income. The decline of income growth shows that citizens of Louisiana were able to afford less as the time went by. Most income was spent on expenses. Suggesting that middle-low-income households in Louisiana citizens are surviving paycheck to paycheck because of higher expenses over time. Higher expenses means that Louisiana citizens can spend less on leisure activities and other non-essential expenses. These overall impacts on the local Louisiana economy affect local businesses. Terms of affordability are also determined by the purchasing power of the buyer. Many buyers in Louisiana lack the purchasing power necessary to acquire a home. Purchasing power is determined by credit scores, income, debt-to-income ratio, and down payment.

Many buyers in Louisiana lack the purchasing power necessary to acquire a home. Purchasing power is determined by credit scores, income, debt-to-income ratio, and down payment. Inflation affects these purchasing power qualifiers. The downpayment on a home affects the monthly overall payment for the home through interest rates. A larger downpayment may reflect smaller mortgage notes and lower interest rates while a smaller downpayment may reflect higher interest rates and mortgage payments. While having a higher downpayment is desired, buyers may be unable to do so due to income levels compared to inflation. Inflation discourages saving habits and increases money spent on the economy. Inflation makes everyday goods more expensive to purchase, while the median income growth remains at –1.66%. The consumer price index measures the average prices of goods and services over time. During the period of January 2010- January 2023 the South Region Consumer Price index increased by 38.26%. This highlights that while the price of goods and services increased, the median income growth decreased.

Figure 1

library(ggplot2)
library(dplyr)

income_change <- -1.66    
cpi_change    <- 38.26    

bar_data <- data.frame(
  series = c("Income Growth (2010-2023)", "CPI Growth (2010-2023)"),
  value  = c(income_change, cpi_change)
)

ggplot(bar_data, aes(x = series, y = value, fill = series)) +
  geom_col(width = 0.6) +
  geom_hline(yintercept = 0, color = "black") +
  geom_text(
    aes(
      label = paste0(value, "%"),
      vjust = ifelse(value >= 0, -0.6, 1.4)
    ),
    size = 6
  ) +
  scale_fill_manual(
    values = c(
      "Income Growth (2010-2023)" = "darkgreen",
      "CPI Growth (2010-2023)" = "red"
    )
  ) +
  labs(
    title = "Louisiana Income Growth vs Inflation",
    x = "",
    y = "Percent Change"
  ) +
  expand_limits(
    y = c(min(bar_data$value) - 5, max(bar_data$value) + 5)
  ) +
  theme_minimal(base_size = 14) +
  theme(
    legend.position = "none",
    axis.text.x = element_text(size = 12, angle = 10, hjust = 1)
  )

Figure 1 shows that the Consumer Price Index has risen over time, while income growth in Louisiana has remained negative. This graph demonstrates stagnant income that reduces purchasing power. Although loan programs such as the Federal Housing Administration (FHA) lower the required minimum down payment for homebuyers, affordability is still constrained by the monthly mortgage obligation. Borrowers must be able to manage principal and interest payments without exceeding acceptable debt-to-income ratios, this means that slow income growth limits how much households in Louisiana can afford.

Figure 2

incomebyparishgraph <- read_excel("/cloud/project/incomebyparish.xlsx")
incomebyparish <- incomebyparishgraph %>%
  select(Parish, Income) %>%
  rename(Parish = Parish) %>%
  mutate(Parish = gsub(" Parish$", "", Parish)) %>%
  rename(NAME = Parish) 

la_map <- counties(state = "LA", cb = TRUE, year = 2023) %>%
  st_as_sf() 

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laparishinc <- la_map %>%
  left_join(incomebyparish, by = "NAME") 

# Plot
ggplot(laparishinc) +
  geom_sf(aes(fill = Income), color = "white", size = 0.3) +
  scale_fill_gradient(low = "orange", high = "blue") +
  labs(
    title = "Median Household Income by Parish (2023)",
    fill = "Income ($)"
  ) +
  theme_minimal()

Figure 2 shows the income of every parish in Louisiana.

Home Appreciation

Homes in Louisiana may appreciate due to economic factors such as inflation or due to location development. Over the years, Louisiana has grown due to factors like economic development which causes job growth and infrastructure creation. Although this influences economic activity, due to economic development the cost of living may increase when economic activity grows or decreases when economic activity begins to decline. When businesses create jobs and entertainment, the area becomes more desirable for consumers, businesses, and even homebuyers. Statistically, we have seen that area development and home appreciation are affected concurrently.

Economic development in Louisiana also includes its festivals, parades, and cookoffs. For example, Festival International located in Lafayette, LA, brings in various visitors from many different cultures. The festival is weeklong and encourages a community brought together for food, music, and articles from other countries around the world. This festival that happens every year brings about $50 million into the local economy. Mardi Gras in New Orleans brings about $891 million into the local New Orleans economy. Festivals and cultural events influence the price of homes because of the level of desire and demand. The area in which a home is located affects the price of the home.

Homes in Louisiana have shown rapid price appreciation from 2012 to 2025, with Acadia Parish demonstrating a significant increase. In 2012, the median home price in Acadia Parish was approximately $50,000, while by 2023 it had risen to $180,000. This means homes in Acadia Parish appreciated approximately more than 60%. During the years of 2020–2022, mortgage interest rates on a 30-year mortgage were historically low due to COVID-19. Due to low mortgage interest rates, citizens purchased homes, refinanced, and sold their homes. However, by 2023, mortgage rates averaged 6.81%, compared to 2.96% in 2021, representing a 130% increase over two years. This appreciation in borrowing costs, along with home price growth, has contributed to declining affordability and reduced purchasing power for prospective homebuyers in the parish.

In contrast, cities such as Caddo Parish have seen home prices decline. In 2012, the median home price was $203,000, while in January of 2023 the median home price decreased to $163,000—a 20% decline in median home prices. According to recent local news articles by KTBS+ News, “Caddo Parish has lost about 7% of its population since 2010. While Caddo Parish has experienced growth in its older population, younger individuals and families are declining. This decline in population impacts the ability to recruit staff, fewer homes being built, and less business development. All these factors affect the growth rate of the Parish’s tax revenue. Tax revenue is not growing at the same rate as expenditures, which indicates that, at some point, expenditures will exceed available revenues.” This indicates that the declining population and slowed economic development contribute to weakened housing market growth.

Mortgage interest rates affect purchasing power through the debt-to-income ratio; buyers are allowed to acquire homes depending on their front-end and back-end debt-to-income ratio. The front-end debt-to-income ratio is the monthly income that goes to paying homeowners’ expenses. The back-end debt-to-income ratio is the amount of gross income divided by the overall and total debt. According to local lenders in Louisiana, the ratio for debt-to-income for most loans must not be over approximately 40% for loan approval. The mortgage interest rate influences this ratio because the interest rate reflects how much homebuyers pay over the loan term, resulting in disqualifying loans due to high interest rates and lowering the purchasing power of the homebuyer.

The price-to-income ratio illustrates that income levels are creating a first-time homebuyer barrier to entry. According to the National Realtor Association (NAR), the average age of first-time homebuyers in 2025 is 40; they attribute the cause to limited affordable inventory. The increase in the average age for first-time homebuyers influences renters and encourages young adults to live at home for longer periods of time.

Recent News

Due to distressed mortgage costs and increasing are for first time homebuyers, recent news suggests creating terms for 50-year mortgage loans. A 50-year mortgage will change how investors invest, package loans and how lenders generate loans to sell to the secondary market. This mortgage loan would notably advance banks and investors’ interest income but also puts investors and banks at risk because of the financial burden on homebuyers. This creates increased risks of default mortgages. These terms release the burden for buyers now, but in the long term this may be risky due to financial burdens. This investment strategy would qualify for more potential homebuyers, but in the long term, significant concerns arise regarding the cash flow on the loans. These lower payments on mortgages create less equity for homebuyers as they pay mostly interest than on the principal of the loan. This creates long term debt and influences less equity building homebuyers. Having little to no equity in a home decreases the amount of buyers who may want to sell their home in future years, which overall creates a decline in home sellers. This will help Louisiana’s home buyers who are victims to stagnant income but is an overall risky decision.

The evidence provided gives us relevant insight into understanding home prices compared to income growth and how it relates to economic development. Every parish has unique goals that are tailored to the residents’ wants and needs. Affordability is defined by each parish’s income. The chart below suggests median home values of each parish can in comparison to their income.

Conclusion

Collectively, the evidence suggests that the affordability of housing is dependent on Housing market affordability in Louisiana has become a problem for many Louisiana residents. A price to income ratio of 3.8 signals that there is a decrease in prospective looking homebuyers. Economic pressure influences renters due to the predictable fixed costs that are a result of renting instead of the variable costs associated with home ownership. According to Figure 1, While Economic expansion in Louisiana has improved the quality of living in the state, it also reduces affordability due to the rising Consumer price index rising while the income levels remain stagnant. Figure 2 shows the income levels across Louisiana showing geographic inequality. This geographic imbalance across the state makes it difficult for Louisiana residents to move between cities. The average price to income ratio of 3.8 shows that Louisiana households need about four years of income to afford purchasing a home. The evidence makes it clear that homes in Louisiana are appreciating due to market conditions and economic expansion. As the market expands, affordable housing in Louisiana remains unchanged. The imbalance of income levels across the state shows that the severity of financial strain varies by parish. While the median income data compared to median home sale shows that there is financial distress. Geographic inequality plays a significant role in housing affordability, suggesting that there is an unequal distribution of households able to afford housing and less qualified buyers. This data also suggests that there are fewer affordable homes; homes in Louisiana have outperformed the market. Homes in Louisiana are now more valuable.

Building equity in homes will now become a challenge as median income levels remain unchanged. Declining affordability leads to pools of less qualified homebuyers, increasing financial burdens for homeowners who are balancing the expenses of other essential items. As a result, lenders may discover an increasing number of home buyers who are near to debt-to-income ratios of 40%. This means fewer approved terms for lenders. A need for financial advisors during the transaction of purchasing a home may become an added necessity, adding another party to the homebuying process. People in the market to sell their home may end up selling for under the asking price depending on their motivation to sell, and Realtors© may eventually see a decline in their professional advice being used as homebuyers try to save on expenses or negotiate for fewer realtor costs at the closing table. Realtors in Louisiana may also see a shift in how long homes stay on the market, with properties taking longer to sell and often selling at a reduced price compared to the original listing. In addition, Realtors may see an increase in interested lessees as more individuals turn to rent instead of purchasing a home.

More research done should support the supply of affordable homes across the United States and examine whether other regions are keeping up with market pressures to make housing affordable. Future research should also highlight the minimum wage and income requirements needed to afford housing in Louisiana. This data will influence policymakers and business leaders to consider increasing wages or creating construction jobs that will expand affordable housing. As income and housing data become consistently available for the year 2025, research should be conducted showing where the economy stands today in affordability of housing.

Bibliography

Kennedy, G. A. (1995). A spatial analysis of variation in rural real estate prices across homogeneous land market areas in louisiana (Order No. 9618304). Available from Dissertations & Theses @ University of Louisiana at Lafayette; ProQuest Dissertations & Theses A&I; ProQuest Dissertations & Theses Global. (304215871). Retrieved from https://ezproxyprod.ucs.louisiana.edu:2443/login?url=https://www.proquest.com/dissertations-theses/spatial-analysis-variation-rural-real-estate/docview/304215871/se-2

Gruben, W. C., & Hayes, D. W. (1991). Forecasting the louisiana economy. Economic Review - Federal Reserve Bank of Dallas, , 1. Retrieved from https://ezproxyprod.ucs.louisiana.edu:2443/login?url=https://www.proquest.com/scholarly-journals/forecasting-louisiana-economy/docview/219379501/se-2

Buggage, C. M. (2022). Trend analysis of Louisiana’s homelessness and predictors among the major cities and parishes from 2007 to 2020 (Order No. 30240940). Available from ProQuest Dissertations & Theses A&I; ProQuest Dissertations & Theses Global. (2760559901). Retrieved from https://ezproxyprod.ucs.louisiana.edu:2443/login?url=https://www.proquest.com/dissertations-theses/trend-analysis-louisiana-s-homelessness/docview/2760559901/se-2

Buggage, C. M. (2022). Trend analysis of Louisiana’s homelessness and predictors among the major cities and parishes from 2007 to 2020 [Doctoral dissertation, Walden University]. ProQuest Dissertations Publishing.

TheStreet. (2024, February 16). This is how much money tourists bring in for Mardi Gras every year. TheStreet.

Redfin. (n.d.). Downloadable housing market data. Redfin. Retrieved December 7, 2025, from https://www.redfin.com/news/data-center/

National Association of REALTORS®. (2025, November 4). First-time home buyer share falls to historic low of 21%, median age rises to 40. News release. https://www.nar.realtor/newsroom/first-time-home-buyer-share-falls-to-historic-low-of-21-median-age-rises-to-40

U.S. Census Bureau. (n.d.). Louisiana – Census Bureau Profile. Retrieved December 7, 2025, from https://data.census.gov/profile/Louisiana?g=040XX00US22