Homebuyers ‘came out strong in 2016’ as home prices moved upward

Sales of existing homes in Middle Georgia in 2016 were the highest in a decade even as homes for sale remain in low supply. At the same time, the values of homes inched upward.

“Middle-income America is finally getting back on their feet,” said Robert Binion, senior vice president with Fickling & Co.’s Macon residential division. “They are finally getting out from being underwater in these homes from the recession. ... What I see in 2016, we sold more properties in (the $50,000 to $250,000) range than in the previous two years.”

A house is considered underwater when the balance of the mortgage loan is higher than the fair market value of the property. This makes it difficult for homeowners to sell their homes because the sales prices won’t be enough to pay off the mortgage debts.

During 2016, people bought 2,219 homes in Macon and surrounding areas included in the Mid-Georgia Multiple Listing Service area. The number of houses sold from 2015 to 2010 in descending years was: 2,079, 1,850, 1,859, 1793, 1,672 and 1,600.

Binion said “middle-income America” homebuyers “really came out in force. They have been sitting on the fence for a long time. They came out strong in 2016.”

Elaine Lee, senior vice president of residential sales in Fickling’s Warner Robins office, saw much of the same.

“I think one thing is buyer confidence is up — buyer confidence in the economy and in the jobs market,” Lee said. “I think that has a lot to do with it.”

Sales in Houston County also have been steadily rising except in one year since 2010. In 2016, 2,400 homes sold, according to information Lee pulled from the Central Georgia Multiple Listing Service. The number of houses sold from 2015 to 2010 in descending years was: 2,119, 1,816, 1,718, 1,513, 1,422 and 1,571.

Also, the Houston County market saw the increase in new construction sales rise from 387 new homes in 2010, to 562 in 2016. And perhaps more significantly, the total value of those homes rose from nearly $76 million to nearly $130 million

“I think the biggest reason for that is we have a demand for it,” she said. “We’ve been seeing, as much as the rest of the country, our inventory of homes shrink. ... So I think it was builder confidence as well as lender confidence. ... It was time we have a good amount of demand for new construction.”

Also, while the number of foreclosures on the real estate market has greatly decreased since the recession, there still are investors buying other properties, Lee said.

The real estate picture in Middle Georgia seems to be a mirror image of the situation in the rest of the state and across the country.

“After several years of housing market improvement, 2016, as predicted, was not a pronounced triumph but more of a measured success,” according to the 2016 Annual Report on the Georgia Housing Market. “Markets took a steady and mostly profitable walk from month to month. Even as supply was short and shrinking, sales and prices were often increasing.”

Statewide, closed sales increased 9.8 percent to 116,015 last year, the report said. Pending sales — homes under contact that haven’t closed yet — increased 10.4 percent to 118,442 to close out the year.

Nationwide, sales during the fourth quarter were the best of the year and it “caused price appreciation to slightly speed up in the final three months of 2016,” according to a report by the National Association of Realtors. The report shows that sales prices in more than half of the markets measured since 2005 are at or above their previous peak levels.

Of the 150 markets the national association has tracked since 2005, 78 now have a median sales prices at or above their previous all-time highs, the report said.

“Buyer interest stayed elevated in most areas thanks to mortgage rates under 4 percent for most of the year and the creation of 1.7 million new jobs edging the job market closer to full employment,” said Lawrence Yun, chief economist for the National Association of Realtors.

Housing inventory still a challenge

During the downturn in the economy, home values were suppressed because of the oversupply and the inability to obtain financing, said John Conn, a broker with Conn Realty in Gray.

But the situation is reversing.

“Now we’re seeing those two things go in the other direction,” Conn said. “We are seeing the inventory numbers shrink a little bit, and that is causing some upward pressure on price. And that has been a good thing for the market.”

His company has seen closings grow a little year over year, he said.

“In 2016, we were up another about 12 (percent) to 14 percent in sales and in total volume dollars,” he said. “It’s that consistent slow comeback out of what had been a difficult time in the real estate business. It’s been a long time coming. And we’re thankful mostly for our clients and customers because they suffered greatly as the value of their real estate (declined).”

Even though traditionally the market slows down during January and February, that did not happen this year.

“It was very steady, and as we go into spring it has really picked up,” he said.

Middle Georgia real estate agents are seeing a lower inventory of houses for sale than they have seen for quite a while. An average listing inventory is usually a six-month supply, which means if no more houses were listed for sale it would take six months to sell every home on the market.

“Last year at the end of the year, we had a four-month supply of homes,” Lee said. “Right now, we have a 3.3-month supply of homes. That is low. ... When you start dropping below that 5-6 month mark, then you’re getting more into a seller’s market ... And a lot of the country is that way right now.”

Low inventory of homes on the market increases the competition for those that are listed.

“For the regular buyer out there, it is not that uncommon to find out there are three or four other offers beside yours,” she said.

Binion agreed, adding “We are selling them as quickly as we’re listing them, and that’s a trend going on throughout Middle Georgia right now. ... There’s just not a lot out there.”

The active listing inventory at the end of March in the Macon area was 867 houses and pending contracts was at 405.

“So half of that inventory is under contract,” he said. “We are definitely not rebuilding that supply quickly.”

Real estate agent Kari Pollock has been in the business for 18 years and she said “this market is so crazy.” She is seeing multiple offers on homes, sellers getting their asking price and buyers are not getting sellers to pay much, if anything, toward their closing costs.

So, the low inventory should help prices go up, which in turn, will cause more people to put their homes up for sale. And it would also increase the pace of new home construction.

“We would sure like to see prices go up,” Lee said. But she pointed out, “the challenge we still have are no matter what the buyer offers and what the seller accepts, unless it’s a cash sale, we still have to go through the appraisal process.” And it’s a slow process to get appraisals to catch up with rising home prices because appraisers have to use comparable sales in the area of the home listed for sale.

And while higher prices might not seem like good news to buyers, an increase in the inventory would give them more choices. And they would want to buy when prices are going up, rather than when prices are declining, so equity in their home would also increase.

“Prices can’t remain flat,” Conn said. “You need it to inflate over time. We want inflation in the economy ... that’s how the market moves forward.”

And buyers need to be aware that even though interest rates went up in December and they are likely to go up again, interest rates can be found below 5 percent, depending on credit and other criteria.

“Interest rates are still historically low and will remain historically low throughout 2017,” Binion said. “We’re looking forward to a great 2017. I think it’s going to be a great year.”

This story was originally published April 15, 2017 at 1:11 PM with the headline "Homebuyers ‘came out strong in 2016’ as home prices moved upward."