Savannah GA Homes Sales Cycles

As the saying goes, there is nothing constant but
change. Everything has a cyclical nature, whether you consider the seasons or business. Homes sales then, like other business metrics, follow a basic business or market cycle. While economists’ opinions vary regarding the theories of business cycles and what causes them, some believe that real estate follows a quite regular boom and bust cycle.
Market cycles in real estate are created by the imbalance that occurs between supply and demand, just like in any other type of market.

Within the market cycle are four components that could be in play: seasonality, secular trends, cyclical fluctuations, and irregular components. There doesn’t seem to be consensus on which of these components are the strongest drivers when it comes to the housing market. Therefore, it is often helpful to look at long-term trends to understand what has happened in the market and what may happen in the future. On the macro level, in “A Forecast for Real Estate,” Martin A. Armstrong, suggests that, after 52 years of escalating real estate trends from 1955 to 2007, there will be 26 years of contraction, with slight improvement from 2012 through 2015, and then downward trends through 2033. Citing a pending collapsing availability of 30-year money, Armstrong paints a dismal real estate future, with overleveraged debt keeping a ceiling on prices.

Fortunately, “real estate is local” is still a positive mantra for the Savannah GA market. Most Savannah area residents who have bought and sold property are familiar with local seasonal waves. Even with the housing slow-down of the most recent two years, the annual Savannah area market activity builds until it peaks in late spring, with sales tapering off during the last quarter. This seasonality holds true for most neighborhoods or properties, with the variable exceptions of Tybee Island and/or luxury homes. From the beginning of 2005 until the housing crisis of 2007, the local trends showed a very balanced market, with new inventory pacing with sales. The divergence of the trend lines began at the beginning of 2008. However, over the last twelve months, inventory has declined and the trend lines between sales and new listings are moving together. On a neighborhood level, some areas of the Savannah market are already balanced once more. Certainly, this positive trend, if sustained, bodes well for the upcoming 2012 market.

Of the remaining market cycle components, the “irregular” component may have been a historical factor. Generally, this component includes unpredictable elements such as a natural disaster or a terrorist attack. However, they also include “random shock” items. One example might be the government’s offer of first time buyer tax credits, which did push local sales higher than expected in 2009. Interestingly, a second random shock that was supposed to have a significant impact on increasing sales, i.e., an artificially sustained and historically low mortgage interest rate, may not have been as strong of a driver as intended.

Overall, regardless of economic theory held or consensus on driving factors, the Savannah real estate market is moving in the right direction in terms of improvement in supply and demand. With the coming year, and the projection of additional waves of foreclosures, the positive trend may be in jeopardy. Also, the national forecast of higher mortgage interest rates in 2012 could be a “shock” that could have an impact in terms of getting buyers off the fence and into action. Moreover, the national economic picture, and particularly the employment rates, will be a major factor. At this point in time, the Savannah market
reflects signs of strengthening, trends we hope to see continue well into next year.

Characteristics of Savannah, GA, “Quick Sales”

The average days on market (DOM) for homes in the greater Savannah, GA, real estate market is approximately 4 months. Occasionally, sellers who list their properties do not have the luxury of waiting for months. Given the current economy, it is common to have the prospect of a job relocation (or job loss) driving the selling timetable. As a result, sellers frequently ask Realtors, “What can I do to achieve a “quick sale?” From the period of August 1 – November 3, 2011, there were 1,102 residential closed sales in the Savannah market. Of those, 337 (30%) were on the market for 45 days or less. For purposes of this analysis, “quick sale” is defined as those homes selling in the 45 day or less time frame.

In response to the seller’s question, Realtors counsel sellers to consider a variety of tactics designed to facilitate a quick sale, including but not limited to:

-Make sure the home is in top condition before beginning the marketing process.

-Don’t underestimate the potential for curb appeal.

-Have the home pre-inspected. Most professionals advise against selling a
home “as is” if at all possible. http://theweeklybookscan.blogs.realtor.org/2007/04/04/book-review-home-makeovers-that-sell/

-Get an appraisal to confirm price positioning, especially for a unique property.

-Hire a professional stager to maximize design, flow, and buyer first impressions. Author Barb Schwarz reports that staged
homes tend to sell in 35 days or less. http://speakingofrealestate.blogs.realtor.org/2009/06/15/to-stage-or-not-to-stage/ In fact, statistics gathered by Stagedhomes.com shows that 94.6 percent of staged homes sell within 33 days, compared to an average
of 196 days for homes that are not staged.


Using raw data from the Savannah Multi-List Corporation (MLS), an analysis was conducted to determine if there were other characteristics or commonalities among quick sales in this market. Factors such as price, the presence and impact of foreclosures, and the geographic dispersal of quick sales were items deemed useful to assess. As part of the review, a series of assumptions were developed:

1. Distribution of properties sold in 45 days or less would be concentrated in MLS areas where the average prices have been trending lower.
2. The percentage of REOs would be high, i.e., over 50%, representing the “deals” of the market that buyers recognize and act upon with urgency.
3. Average prices of quick sales would be substantially lower than the average for the market area as a whole.

Using the data for August 1 – November 3, it became apparent that these assumptions did not reflect reality. Some interesting findings were noted:


1. The distribution of quick sales mirrored the distribution of sales overall for each MLS area. In only one area, Bryan County, the quick sale percentage was slightly (about 2%) higher. That means that there isn’t a particular area in the greater Savannah
real estate market that has higher than average potential for quick sales.
2. Contrary to expectations, the REO percentage of quick sales equated to half the sales in Downtown, Midtown/Eastside, and Bryan County. In other market areas, the percentage was variable and significantly lower.
3. Quick sale “discounts” in price did not exist in Midtown/Eastside or Southside. In other words, quick sale prices were about the same as the average sale prices overall. Even though the aforementioned areas had the highest percentage of REO sales, the prices did not reflect huge buyer savings. Two factors could be at work: a) the lowest priced foreclosures may have already cleared the market; or b) the banks have begun to agree to very aggressive initial pricing in order to clear their collective balance sheets of the assets. The initial assumption of a lower price or discount facilitating a quick sale appeared to hold true in The Landings,
Westside, Effingham, and Bryan, all of which had quick sale average sale prices at 9 to 13% below the area’s average. Incredibly, the quick sales in the downtown market segment were almost 48% below the average sales price for that area.

What do these findings mean for sellers?

-In most market segments, sellers have a strong likelihood that a quick sale can be achieved, even when competing against
foreclosure properties.

-A seller in the Downtown market is going to be fighting an uphill battle for a quick sale if the fight is limited to price. Downtown sellers need to consider other elements of the transaction to make their properties more competitive, i.e., pre-inspection, warranties, impeccable condition and/or staging, or closing cost contribution.

-For sellers in other Savannah area market segments, achieving a quick sale can be facilitated by setting a price up to 10% below market average to open up the highest possible buyer pool. This is especially true for market segments with historical overall higher price points.

For more information about the local real estate market, go to www.affordablesavannahhomes.com or contact me at VLinscott@comcast.net to assess your specific property need.

Savannah Housing Inventory Shows Improvement

Over the last three years, the real estate market in and around Savannah, Georgia, has mirrored the volatility of the national trends. One key statistic to measure market recovery, or lack thereof, is the "months' supply of inventory." According to the National Association of Realtors (NAR), the U.S. housing inventory stands at 8.5 months, based on its 10/20/11 press release. This means that the top twenty metro markets studied have shown considerable improvement and stand poised for recovery. In fact, NAR cites that price stabilization occurs at around 7 months' supply. Nationally, the news is promising. However, as any Realtor will comment, "all real estate is local." So, how is Savannah performing?

The last three years have been the most volatile in real estate. Looking at local statistics sourced from Savannah Multi-List Corporation data, the local Savannah real estate market areas continue to show a high degree of variability. In this recent past, both the Historic District and The Landings on Skidaway Island were hit hardest in terms of standing iinventory (and price). Significant changes in price and market timing for new listings have resulted in improvement in those sub-markets, but both areas remain at over twice the "stabilization" target. What does this mean for sellers? For the foreseeable future, there needs to be a continuing focus on pricing strategy. Only 16 to 18 homes are selling per month at The Landings and Historic District, respectively. Therefore, understanding what it takes to be in that number will be incredibly important. Certainly, that's what a good Realtor will bring to the table.

The perimeter sub-markets of Savannah (Pooler, Bryan, and Effingham) are outperforming all other market segments. All have standing inventory of less than 10 months. Certainly, Bryan County has benefitted from changes in military personnel. Pooler has experienced the benefit of having the highest concentration of new homes available. Key drivers of the reduction of inventory in Effingham County are less discernible. The major result for all areas, though, is clear. Prices will continue to stabilize as these sub-markets lead the way to an overall real estate recovery for Savannah. What does that mean for buyers? For those who want to live in the Savannah suburbs, a sense of urgency should govern home shopping. Home bidding will be more competitive and buyers will pay closer to list price for their selections.

The remaining sub-markets of Savannah, i.e., Midtown, Southside, and Islands, still have a way to go, but the statistics are promising. "Deals" remain abundant on the Southside. A good percentage of Midtown homes are being purchased with cash, a sure sign that investors recognize the overall attractiveness of the real estate market, and perhaps more importantly, realize that now is the time to buy. Islands sales are relatively strong, with more than 30 homes selling each month, but more improvement is needed. Negotiations in this sub-market remain more intensive.

For more information about the Savannah real estate market, visit www.affordablesavannahhomes.com.