It may be broiling outside, but Lafayette’s real estate market is ice cold. For sale and for lease signs abound around town. But if you really want to understand what’s going on, just take a look at the numbers.

Pretty much every metric is down. Housing, multi-family, hotels, office, industrial. You name it, and it’s doing worse now than five years ago. That doesn’t surprise Gary Wagner, UL’s Acadiana business economist. “The job losses we experienced in 2014 and 2015 were the worst since 1990, which is the earliest regional data we have,” he says. “What happened a few years ago hit this region worse than the Great Recession. So to see these kinds of results in real estate is not surprising to me at all.”

But even if a downturn is to be expected, that doesn’t make the numbers any less daunting. And what’s especially worrisome is that these numbers could get worse as Lafayette’s real estate supply keeps increasing while demand for real estate stalls or falls.

Home values fell 3.6% over the last year and are projected to fall 2.1% over this year, according to the Zillow Home Value Index.

The Zillow Home Value Index measures the health of housing markets by aggregating Zestimates, which are Zillow’s assessments of what houses are worth. Nationally, the ZHVI shows a housing market that’s slowing slightly, with the increase in home values dipping from more than 7% last year to around 5% this year.

But in Lafayette, according to the ZHVI, home values actually decreased 3.6% last year and are projected to go down another 2.1% this year. That means if you bought a $200,000 house at the beginning of last year, by the end of this year it would be worth almost $225,000 if it grew at the pace of the national average. In Lafayette, however, its value would drop to $190,000.

Out of the 150 largest metro areas in the U.S., the “growth” in the value of homes in Lafayette ranked 148 last year. And before anyone writes off data from a consumer website, keep in mind the Federal Reserve’s board of governors incorporates data from Zillow into its reports.

The average time on the market in Lafayette is 102 days, and the share of listings with price cuts is 20.3%, according to Zillow.

That’s compared to 66 days on the market nationally and 16% with price cuts. So homes in Lafayette are taking longer to sell, and more sellers are cutting prices to close deals than the national average.

Apartment vacancies have increased from 4.1% in 2014 to 10.9% in 2018, according to LEDA.

LEDA’s Quarterly Apartment Market Study only covers apartment buildings with more than 100 units. And part of this rise in vacancies was driven by an increase in supply, as 1,000 new apartment units came online during this time frame. But when compared to the Federal Reserve Bank of St Louis’s national average apartment vacancy rate of around 7%, it shows that over the last few years Lafayette’s largest apartment buildings went from low to high vacancies. This represents a trendline that can’t be ignored, especially when compared with the next number.

In the city of Lafayette, apartment leasing/renting dollar volume fell from $156 million in 2013 to $131 million in 2018, according to the Lafayette Parish Sales Tax Office.

That $131 million is actually an increase from the $128 million in lease volume for 2017. But the fact that rental revenue has fallen while apartment inventory has risen is a sign that there’s not enough demand to support what the market’s offering. And this dynamic’s set to get worse as even more new apartment buildings come online. Because what’s inevitably going to happen is increased vacancy rates will force reductions in rent, which will further erode the income that can be generated by apartment buildings.

Office occupancy rates dropped from 90% in 2013 to 83% in 2018, according to Champion Real Estate and Coldwell Banker.

To be fair, these numbers are incomplete, both because it’s hard to capture all office buildings large and small and because it’s common for building managers to overstate their occupancy. As a result, it’s likely these numbers skew higher than the on-the-ground reality. Just like with apartment vacancies, the emptier office buildings get the more likely owners are to drop rents, which erodes net incomes and property values.

The price of office buildings has dropped as low as $25 per square foot, according to recent sales like the Chevron building on Johnston Street.

If you wanted proof about how lower occupancy hurts property values, just look at what it costs to buy an office building in Lafayette. While the Chevron building may be an outlier, there are a number of other office buildings sitting on the market unable to find buyers at $40-$50 per square foot. Yet the replacement cost for building new offices is closer to $100 per square foot.

What that represents is a cratering of the value of office buildings. This isn’t just bad for anyone who owns an office buildings who’s seen the value of his asset drop by millions of dollars. It’s also troubling for developers, contractors and landowners who likely won’t be able to justify construction of new office buildings in Lafayette any time soon. It’s arguably an important bellwether for the overall health of the local economy.

So what does this all mean?

No matter how you slice it, Lafayette’s real estate market is in a slump. And these market dynamics could get worse before they get better, as there’s still new supply coming online at a time when it’s not clear where new demand is going to materialize. Every time supply increases and demand doesn’t it puts further strain on prices in an already struggling market. What that creates is a downward cycle where prices and revenues fall as a larger inventory of properties fights for its share of a shrinking pie.

It seems unlikely that all of Lafayette’s real estate market will suffer from as big a hit as it did during the downturn of the 1980s, but the reality is that some parts of the market are already experiencing a similarly acute downturn, like office buildings. At the same time, it’s hard to see when or how the air will stop leaking out of our market’s balloon and real estate can get back on a path to heating up again.