For Jabbar Adesada’s Savannah house hunt, the 15th time was the charm.
The 20-year-old U.S. Marine had his heart set on buying — not renting — and was not a fan of the barracks on-base at Hunter Army Airfield.
“I am completely against renting because I understand that there’s power in homeownership,” he said.
Since starting his search for a multi-unit property in February, Adesada has made 15 offers on properties. In June, he finally secured his first home: a four-unit property on West 40th Street in the Starland District. He plans to rent out the units he won’t be living in at an affordable rate, since he knows how stretched the rental market is right now.
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“It’s great because I know what this will do for me in the future. Because even if I buy this property, let’s say it goes down in value, I’m not worried as long I’m able to provide affordable housing to the locals in Savannah, and I cannot pay a ridiculous amount of money to live in Savannah,” he said.
The home real estate market in Savannah has remained hot throughout the pandemic, leading to record-high selling prices and low inventory as new residents flood the market with cash and above-asking offers.
In May, the average home sale reached $280,000 in Chatham, Effingham and Bryan Counties. That’s a more than 36% increase from the previous May, according to Georgia Multi-Listing Service, the data aggregator for all real estate operations in the state.
“The last couple of years have been rough,” said Rachael Gosetti, a buyer’s agent with the Keller-Williams Harris team in Savannah. “Basically the rule of the game has been that it’s a seller’s market and they get what they want.”
But with a rise in interest rates and inventory in the local market, Gosetti predicts a cool down is coming for those in the market for a new home.
“Give it a few months and it’s really going to be a different market than what we’ve seen the past two years.”
Demand lessened, but not enough to drive costs down
Inventory has increased in recent months, lessening some strain on the market, according to MLS data.
Gosetti said a typical home in Chatham County gets three to five offers. Since 2020, that average has jumped to 15 offers per property. “A year ago you were offering a gift certificate to a nice restaurant and naming your firstborn after the sellers” to get the home, Gosetti said.
The intense competition has prompted sellers to list their homes — Gosetti called it “fear of missing out” on top prices — and driven buyers out of the market.
“I think buyers are done with the rat race,” she said.
And while demand is lessening, especially for homes at either end of the cost spectrum, lending agent Michael Caputo said it’s not helping lower prices for the average buyer — yet.
“There’s still solid demand to live here, and it hasn’t gotten easier with higher (interest) rates to find affordable options. And that’s a function of inventory,” said Caputo, who owns First Coast Mortgage, a lending office.
“So, if there were 20 offers before, and now there’s only three, the home is still selling fast. You’re not getting the inventory built up as much as you’d like.”
A year ago, interest rates hovered below 3%, according to Forbes. Now, they average 5.5% and may continue to rise, which limits how much buyers can spend.
“So, 2020 and 2021 were very busy years, both with the number of people buying homes and relocating to our area, and part of that was definitely driven by lower interest rates, which were a result of actions that Federal Reserve took to help the economy along,” Caputo explained.
Now that interest rates are spiking — Adesada is looking at about 6% rate for his 30-year fixed mortgage — buyers are having to adjust expectations.
“For a 1% increase in rate,” Caputo said, “it’s going to drive up your monthly payment about 10% … and that impacts consumers’ purchasing power.”
Locals competing with cash-flushed investors
It’s not just a neighbor down the street Savannah-area homebuyers are competing with, however.
A mix of people migrating from higher-wealth states (New Jersey, Illinois and New York topped the list, according to U.S. News) as well as investors looking for rental income and hedge funds wanting to sink their considerable cash into property are outbidding Savannahians looking to move into their dream midcentury neighborhood or into a larger home.
“We were seeing a lot of that (remote worker, people escaping expensive markets),” Gosetti said. “What I’m seeing now is not out-of-town buyers, it’s investment companies. Those are cash buyers that I’m having to compete with.”
Nationwide, hedge funds are buying up properties with cash, worsening an already-fraught housing crisis that’s nowhere near its end. According to architectural nonprofit Common Edge, hedge funds hold onto properties for up to a decade, then sell in a bundle to other hedge funds and investors, completely cutting local buyers out of the sell.
Gosetti keeps seeing her clients get “beat out by these big multimillion-dollar companies” who offer way-over asking price.
“It sucks to see a family of four get constantly beat out by those kinds of offers,” she said.
For those looking to buy, Gosetti said the key is “planning, planning, planning.”
“Hire a realtor and get a pre-approval letter (from a lender) before you even set up your Zillow search,” she advised. “Or else, you’ll feel like you’re running behind the curve.”
Zoe covers growth and how it impacts communities in the Savannah area. Find her at znicholson@gannett.com, @zoenicholson_ on Twitter, and @zoenicholsonreporter on Instagram.
