For Jabbar Adesada’s Savannah apartment hunt, the 15th time was the appeal.
The 20-year-old US Marine was keen to buy—not rent—and wasn’t a fan of the barracks at Hunter Army Airfield.
“I’m totally against renting because I understand home ownership has power,” he said.
Since beginning his search for a multi-unit property in February, Adesada has had 15 real estate listings. In June, he finally secured his first home: a four-unit estate on West 40th Street in the Starland District. He plans to rent out the units he won’t be staying in at an affordable rate, knowing how tight the rental market is right now.
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“It’s great because I know what that 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 as I’m able to provide affordable housing for local people in Savannah, and I can’t pay a ridiculous amount of money to live in Savannah to live,” he said.
The Savannah real estate market has stayed hot during the pandemic, resulting in record-high sales prices and low inventories as new residents flood the market with cash and inflated offers.
In May, average home sales in Chatham, Effingham and Bryan Counties reached $280,000. That’s a more than 36% increase from last May, according to the Georgia Multi-Listing Service, the data aggregator for all real estate deals in the state.
“The last few years have been tough,” said Rachael Gosetti, buyer for the Keller-Williams Harris team in Savannah. “Basically, the rule of the game was that it’s a seller’s market and they get what they want.”
But with rising interest rates and inventory in the local market, Gosetti predicts a slowdown for those in the new home market.
“Give it a few months and it’s really going to be a different market than what we’ve seen in the past two years.”
Demand fell, but not enough to bring costs down
Stock levels have been rising in recent months, which has caused some stress in the market, according to MLS data.
Gosetti said a typical Chatham County home gets three to five offers. Since 2020, that average has risen to 15 listings per property. “A year ago you offered a gift certificate to a nice restaurant and named your firstborn after the sellers” to get the house, Gosetti said.
Intense competition has prompted sellers to list their homes – Gosetti called it “fear of missing out on prime prices” – and pushed buyers out of the market.
“I think buyers are done with the rat race,” she said.
And while demand is falling, particularly for homes at both ends of the cost spectrum, credit broker Michael Caputo said that’s not helping bring prices down for the average buyer — yet.
“There is still solid demand to live here and with higher (interest) rates it hasn’t gotten any easier to find affordable options. And that’s a function of inventory,” said Caputo, owner of First Coast Mortgage, a credit bureau.
“So if there were 20 offers before and now there are only three, the house is still selling fast. You don’t get as much inventory built up as you’d like.”
A year ago, according to Forbes, interest rates were below 3%. Now they’re averaging 5.5% and may continue to rise, limiting buyers’ spending.
“So 2020 and 2021 were very busy years, both with the number of people buying houses and moving into our area, and part of that was definitely due to lower interest rates that were the result of actions the Federal Reserve took had together to help the economy,” explained Caputo.
Now that interest rates are skyrocketing — Adesada expects a rate of about 6% on its 30-year fixed-rate mortgage — buyers need to adjust their expectations.
“For a 1% increase in the interest rate,” Caputo said, “it’s going to increase your monthly payment by about 10% … and that affects consumer spending power.”
Locals compete with money-infused investors
However, it’s not just a neighbor down the street that homebuyers in the Savannah area are competing with.
A mix of people hailing from wealthier states (New Jersey, Illinois, and New York topped the list, according to US News), as well as investors looking for rental income and hedge funds looking to invest their sizable cash in real estate, outbid the Savannahians, who looking to move into their dream mid-century neighborhood or larger home.
“We’ve seen a lot of that (remote workers, people escaping expensive markets),” Gosetti said. “What I see now are not outside buyers, but investment companies. These are cash buyers I have to compete with.”
Across the country, hedge funds are buying up properties with cash, exacerbating an already tense housing crisis that is far from over. According to architecture nonprofit organization Common Edge, hedge funds hold properties for up to a decade and then sell them in bulk to other hedge funds and investors, shutting out local buyers from the sale entirely.
Gosetti keeps seeing her customers “beaten by these big, multimillion-dollar companies” that are asking well above the asking price.
“It sucks to see a family of four constantly being beaten by offers like this,” she said.
For those looking to buy, the key, according to Gosetti, is “plan, plan, plan.”
“Hire a real estate agent and get a pre-approval letter (from a lender) before you even set up your Zillow search,” she advised. “Otherwise you feel like you’re running behind the curve.”
Zoe covers growth and how it is affecting communities in the Savannah area. You can find her at firstname.lastname@example.org, @zoenicholson_ on Twitter and @zoenicholsonreporter on Instagram.