A friend, call him “Kit”, works in Northern Louisiana building cabinets.  He bids as a subcontractor on new housing, as well as remodeling projects.  He told us today:

“I just don’t understand it.  I haven’t seen it this bad since 1987. I just don’t understand it!  I talked to my friends at the banks. They say they are willing to lend money.  Interest rates are low.  Building supply prices are low.  But nobody is doing anything.  It’s weird.  I’m startin’ to worry.”

This time the low oil prices have crimped a big source of tax revenue for the state, but states like Louisiana usually don’t grow as fast in good times, or fall as hard as other areas in the nation in bad times.  But now, the housing collapse is beginning to be felt there too. Zero Hedge shows a report from Deutsche Bank that projects various MSA’s home price declines.  According to this report, the New Orleans area is due for about 27% additional fall in home prices before reaching bottom.  We wanted to tell Kit the worst is over, but it’s not.  The truth is even if the interest rate for buying homes is zero, the expectation is that prices will fall.  Until that expectation changes, home sales and home building will be slow in the Bayou state.