ANALYSIS: Local housing market's outlook tied to jobs

Reams of analytical data exist on the local housing market.

The most influential statistics, at least as they pertain to the rest of 2010, however, cannot be found in any property record, building permit or Multi-List Corporation database.

The near-term health of the housing market in Chatham, Bryan and Effingham counties is tied to job preservation. No matter how high the inventory of housing or how low the mortgage rates, the real driver of sales is job stability and job creation, local real estate insiders say.

"Especially when it comes to homes in the more affordable price ranges, anything that has an impact on jobs has an impact on housing," said Vickie Linscott, a Realtor with Keller Williams Realty and the brokerage's in-house data guru. "People won't make a big investment like a house if they're concerned about their job or finding a job."

No wonder there's a sense of optimism coming off two months - July and August - those insiders described as "stinky," "awful" and "a train wreck."

With the scheduled October opening of the Mitsubishi Power Systems plant, the pending announcement of another large manufacturing project and the imminent return of as many as 19,000 deployed soldiers of the 3rd Infantry Division, the next four months could see momentum return to the housing market.

"August was slow, but September is slamming," said Tracey Burdette, a loan officer with First Bank Mortgage in Pooler. "Borrowers are feeling better about their situations, and stuff is starting to move again. So far, September is busier than the early summer when the tax credit was available. I see that trend continuing."

Expectation levels

The definition of a "good fall" fluctuates based on expectations, Realtors said.

September, October, November and December are typically four of the five slowest months of the year for home sales, the other being January.

Few expect sales in the next four months to rival those of the spring buying season, as happened last year thanks in large part to the first-time home buyer tax credit.

But sales numbers similar to those of 2009's fall months would be encouraging. About 1,300 homes sold in the final four months of 2009, an average of 325 a month. That pace would be ahead of the same time period in 2008 and not far behind that of 2007's final third.

Buyers should continue to see favorable conditions in terms of rates and prices. The national political climate - and, in turn, the economy - is unlikely to change before the mid-term elections in November.

The interest rate on a 30-year fixed mortgage has hovered around 4.5 percent since July, and the average list price on homes is 12 percent below what it was a year ago.

"I am conservatively optimistic that we are seeing a big upswing," said Realtor Lynne Butler Bayens of Re/Max Accent. "Not a big upswing in pricing but in activity."

The area's bloated inventory and the continued stream of distressed properties coming onto the market depressed prices during the recession. And while the number of new listings has dropped steadily since March and inventory is near its lows for the year, without an increase in demand, prices won't climb.

Plus, many homes in existing middle-class neighborhoods remain highly priced on a square footage basis.

On Wilmington Island, for example, non-waterfront homes measuring less than 2,000 square feet in established neighborhoods are selling for between $110 and $120 per square foot.

Yet the listings include homes in the same neighborhoods where sellers are asking as much as $157 per square foot.

Those homes aren't selling. Even those that draw interest from buyers run into problems during the appraisal process. A local loan officer with one of the megabanks recently told a group of Realtors close to 30 percent of the contracts he's handling these days appraise below the offer price.

In those instances, the seller either adjusts the price, the buyer comes up with a larger down payment or the deal fails.

"We've spent long enough in this shifted market that sellers should understand the competitive pricing and staging and everything that puts their property in the best possible light," Linscott said. "Some do. Some don't."

Competition slows

Sellers won't have to compete with an avalanche of new homes on the market.

Only a handful of home builders continue to construct speculative houses or those built without a buyer. Many couldn't do so even if they wanted to, as banks are under pressure from federal regulators to cut back on construction loans.

"Lending is still awful, the worst it's ever been," said Read Brennan, a builder with Synergy Designer Homes and an officer with the Home Builders Association of Savannah. "If you get a loan, it's because you have 20 percent in it. Having skin in the game is one thing; having every bit of cash you can spare in is another thing."

The number of building permits issued locally dropped 23 percent in the second quarter compared to the first quarter. Permit activity has fallen further so far in the third quarter.

Buyer interest is on the rise, Brennan said. Most of the local builders have inventory remaining from the speculative building they did while the tax credit was still available and some are signing sales contracts with buyers to build homes.

Subdivisions in West Chatham and Bryan County remain popular. Still, analysts both nationally and locally don't foresee a heavy demand for new home construction for at least another year.

Even with the prospect of near-term job growth here, the Savannah area is still down approximately 10,000 jobs from the peak in early 2008, according to Michael Toma, director of the Armstrong Atlantic State University's Center for Regional Analysis.

"It will take three years of modest growth to get back to those levels," Toma said.

The housing market will likely recover at the same pace.