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Rising Savannah rent sparks more home sales

  • Savannah real estate agents say that increasing rent prices in downtown are causing long-time renters to start a search for affordable housing that provides an investment opportunity such as this 1,200-square-foot condominium on Whitaker Street that is listed with Engel & Volkers Savannah for $319,000. (Katie Nussbaum/Savannah Morning News)
  • Mopper

Increasing rent prices in Savannah and surrounding areas are spurring millennials to seek affordable housing, bucking the national trend of the younger generation delaying home ownership.

In May, rents increased in Savannah by 0.2 percent marking the fifth straight month of increases. Year over year, rents are up nearly four percent with one-bedroom units averaging $860 a month and two-bedrooms $1,000 a month, according to monthly data recently released by Apartment List.

The thousands of Savannah College of Art &Design students who call downtown home also impact the market, according to Dicky Mopper of Engel &Volkers Savannah and Mopper Property Management. Mopper has been in the industry for more than 40 years.

While multiple student residents might split a $1,600 a month rental, making their share a few hundred dollars a month, Mopper said that same apartment is less affordable for a young professional or couple, causing many to look for affordable housing.

“Very often, even though there are people who want to rent and have no desire for home ownership, the rising rent prices has created a new purchaser market because a lot of people are making the decision. Why should they pay $2,000 in rent when they could use that for a mortgage payment?” said Mopper.

“We’re definitely seeing more people who thought they were going to be in the rental market becoming buyers.”

Mopper’s management company oversees about 150 units, including a few homes. In prime locations such as the Historic District, he said a one-bedroom unit usually ranges from $1,400 to $1,800 a month and two-bedrooms cost upwards of $1,500 to $2,500 a month.

Effect on the housing market

The housing market in Savannah is a diverse one, making it easier for those transitioning into the market for the first time to find something they like and can afford, Mopper said.

“What we find right now is that tremendous numbers of young people are buying houses, so our market range for people buying usually starts in the mid-20s and the majority of the sales we make today are people in their early 30s,” he said.

“These are young professionals and a lot of them are second-time buyers at that point; we’re seeing a great deal of that.”

Even with 800- to 900-square-foot condominiums selling for $250,000 to $300,000, the downtown area continues to be a popular market for younger buyers due to the walkability and proximity to shopping, work and entertainment.

“Millennials tend to come into the market with more money than they used to because they’re well-educated and tend to have good-paying jobs, but there are still affordable areas for those that aren’t at the top of the job market,” said Linda King, real estate agent and president of the Savannah Area Board of Realtors.

Those sales have continued to make a difference in the Savannah-area market, which includes Bryan and Effingham counties. Monthly data released by Savannah Multi-List Corp., shows that local 2017 housing market sales are already outpacing last year by about 12 percent. In April, 615 homes moved across the three counties compared to the 531 homes sold in April 2016.

King said another good sign for the market is the selling of investment properties, which are starting to move at higher rates.

“Not only do you want to make sure that housing is steady for home buyers, but when that investment market is back and steady then you’re keeping neighborhoods up,” she said.

Another trend making a comeback is housing purchases by parents of college-aged students, King said. The move allows students to skip the high rent prices while providing investment and equity for their parents.

“For a while things went down and that went away, but it’s coming back now that prices are stabilized. Our market has increased and we have less than six months of supply, so inventory is down considerably. There were times (during the recession) that we had eight or nine months of inventory, so people consider it a good investment again,” she said.

Saving up

There is still one hurdle that can slow aspiring younger home owners: the down payment. According to a recent nationwide survey of 24,000 people by Apartment List, more than half stated that the down payment was their primary reason for delaying home ownership and 68 percent had less than $1,000 saved for the payment.

The study found that in many metro areas across the country it can take a person decades to save for a 20 percent down payment based on the median price of a condominium. In Atlanta, saving for a $34,620 condo could take a person almost nine years. It can take more than 20 years in Austin, Texas, and Los Angeles and San Jose in California.

In April, the median price for a home in Bryan, Chatham and Effingham counties was $200,000 and in the Low Country. Both Mopper and King say it’s rare to pay 20 percent down when purchasing a home.

“When I first started in real estate we didn’t do FHA (loans), we didn’t do VA (loans). We did conventional loans with 20 percent down. That’s not the way of life anymore. I don’t know many people, even people with the means that like to pay 20 percent down anymore,” said King.

“Our market has definitely shifted and it’s not an embarrassment to have a 3.5 percent down payment on a loan. I would say the 20 percent down payment is an enigma.”

An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. Perspective buyers with credit scores of 580 or higher will qualify for a 3.5 percent down payment and lower credit scores can qualify for a 10 percent down payment, but Mopper said it’s always important to remember the lower the credit score, the higher the interest rate.

“… Make sure you’re doing everything you can to have solid credit, because your credit rating will have a lot to do with your interest rate. Some people can qualify for a loan, but they may pay more interest than another person because their credit wasn’t good,” he said, adding that another crucial piece of the puzzle is knowing how much you can afford.

“The most miserable feeling that a person can have is having a mortgage that they feel makes them a prisoner to the house. Make sure that you do your budget and know what it takes for you to enjoy your lifestyle and be able to make the payment at the same time.”

King recommends setting aside 10 percent of your monthly salary, if possible and working with a lender before you set your sights on a new home.

“(Lenders) are very good about giving you a game plan. They’ll look at your credit and see what your score is, tell you things you need to fix and how to get there,” she said.

“When you go from Savannah to California without a map, you’ll eventually get there, but if you have a map you’ll get there faster and that’s what a good lender can do for you. Don’t wonder about it, be preemptive and let somebody give you a map to get where you want to be.”

More Info

Breakout Box: 

By the numbers

Savannah area home sales

2012 2013 2014 2015 2016 2017

Jan. 258 308 318 368 355 405

Feb. 275 299 330 398 443 473

Mar. 396 392 423 520 550 627

Apr. 378 464 417 506 531 615

Savannah area home sales By the numbers

In April, 615 homes sold across Bryan, Chatham and Effingham counties. It was the highest April on record since before 2012. So far this year 2,120 homes have sold across the three-county area, which is about a 12 percent increase compared to this time last year.

2012 2013 2014 2015 2016 2017

Jan. 258 308 318 368 355 405

Feb. 275 299 330 398 443 473

March 396 392 423 520 550 627

April 378 464 417 506 531 615

Savannah area home prices By the numbers

The median home price for Bryan, Chatham and Effingham counties came in at $200,000 for the month of April. A month over month increase of $5,000 and a $4,100 increase compared to this time last year.

2012 2013 2014 2015 2016 2017

Jan. $141,950 $143,750 $161,423 $197,895 $189,900 $192,00

Feb. $125,000 $164,450 $161,650 $180,000 $181,500 $189,990

March $153,450 $164,375 $172,000 $194,000 $185,000 $185,000

April $164,950 $160,440 $169,900 $180,000 $195,900 $200,000

More information To read the entire Apartment List report, go to www.apartmentlist.com/rentonomics/american-dream-homeownership-delayed-m...

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