Savannah housing market update: new listings down from a year ago, but inventory still too high

For a great roundup of the Savannah metro area real estate sales data from January, check out Adam Van Brimmer’s “Local housing market trudges along” in today’s Savannah Morning News.

Since Adam moved from sports writing to business writing, which he did with remarkable dexterity I think, I have written a lot less about the local housing market in my columns. I know some readers — perhaps many readers — thought I was writing too much about housing, and some thought that writing about the problems was simply making the market worse. I could not disagree more. Owners, realtors, long-range budget planners, buyers — every group stood to benefit from a realistic presentation of the hard facts.

As we came into January, I was most interested in the number of new listings. January is always a slow month for sales, but new listings have been rising quite dramatically in recent years in January, with a stunning 863 new residential listings (single-family homes, modular homes, condos) in the Savannah metro area (Chatham, Effingham, and Bryan counties) in January 2010. I speculated that some percentage of that surge was, however, related to the impending expiration to tax credits in spring 2010. I think that was probably the case. Not only did we have more sales in advance of the tax credit expiration, but we also had more listings.

In January of 2011, the number of new listings fell to 732, less than the 863 from January 2010 but still more than twice the number of new January listings a few years ago. The total inventory in January fell from 5,223 in 2010 to 4,568 in 2011.

So, on some levels, things look a little better. But a brighter outlook doesn’t necessarily mean that we’ll be seeing prices stabilize anytime soon in areas where they are currently falling.

There are a couple of fundamental numbers worth noting here. On average in America, there’s about a 6% turnover yearly for single family residential properties. Typically, no more than 3-4% of the housing stock would be on the market at one time. New home sale are typically about 15-20% of the sales market. These are broad historical trends, and I’m also using here some broad numbers — so please don’t quote any of this as precise. Later this spring, the census data will say that the Savannah metro area has somewhere around 90,000 owner-occupied residential units, so that means a typical sales year might see 5,500 of them sell. We were well below that in 2010, and I think it’s reasonable to expect that total sales could rise as high as 4,500 this year (we’ll have a lot better idea over the next couple of months if I’m being overly optimistic here). That’s still below the historical trend but it’s really not so bad. We’ll probably see over 700 new units constructed, which would be what we would expect based on historical trends.

The problem with 4,500 sales is that we have that many units listed for sale right now, before the surge of spring listings, with many foreclosures in progress, and with many bank-owned units in limbo. If we imagine that 3% of the housing stock would in a “normal” year be listed for sale in a slow month like January, then we should have about 2,700 listings right now, not 4,500. With new listings of course coming onto the market, it’s a reasonable bet that 20-30% of the homes currently listed for sale will not sell this year (maybe a little more, probably not less). It’s obvious that that dynamic will put considerable downward pressure on prices, at least in some neighborhoods and at some price points (for the most part at the high end, I’d say).

There’s really no way to get around these numbers. A slower pace of new construction would help us get through the housing crisis faster, but would hurt employment in the short run, perhaps dramatically. Lower property taxes would help homesellers and buyers cope with declining values, but we have a flawed system of valuation that prevents quick correction of tax values.

I wrote in my column recently that it would probably be 2014 before we could see a more balanced six-month inventory. If anything, looking at the January listings and anemic sales, that seems a little optimistic, unless there’s a strong, sustained recovery for the national and local economies.