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4 key takeaways from housing market update
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Tommy Howard, of the Norton Agency, gives a presentation Wednesday, Sept. 28, 2022, at the Greater Hall Chamber of Commerce on housing prices in the area. - photo by Scott Rogers

Tommy Howard, president of brokerage services for the Norton Agency, a Gainesville-based real estate firm, gave an update on the housing market Wednesday in a presentation at the Greater Hall Chamber of Commerce. 

Here are some key takeaways. 

Homebuyers, don’t panic yet about interest rates

Last week, the Federal Reserve raised its key interest rate by three-quarters of a point in an effort to curb inflation. It is the fifth increase this year and the third consecutive 0.75 percentage point increase.

Mortgage buyer Freddie Mac reported Wednesday that the 30-year fixed mortgage rate climbed to 6.82%. That’s the highest rate since October of 2008 when the housing market crashed, triggering the Great Recession.

But Howard said homebuyers shouldn’t panic yet. 

“A lot of people probably in this room had interest rates and bought houses at 7, 8, 9%, and it's just what we did,” he said. “I don't think that there needs to be a huge amount of panic when it comes to these interest rates.” 

He suggested that mortgage rates have historically tended to be higher, noting that the 30-year rate in October 1980 was over 18%. 

That said, home sales in Hall are down 12.6% in the past year, he said, and the trend is likely to continue. 

“We're seeing the sales volume go down and the inventory go up,” he said. 

But the demand for housing is still high. 

“With all of that said, the demand for housing remains high,” he said. “People still need a place to live. There's still an influx of population.” 

He noted that from 2010 to 2020, Georgia’s population grew by about 1 million people, and “the secret is out” about the southeast, he added, with people all over the country wanting to move here. 

It’s still a bad time to be a first-time homebuyer 

“It’s going to be a real big challenge for folks that are coming in and wanting to buy a house for the first time,” Howard said. 

The “biggest indicator” for the lack of affordable housing, he said, is the growing disparity between median income and housing prices. 

In 2022, the median sales price for a home in Hall County was about $400,000, which was 6.1 times higher than median household income the same year. In 2012, it was only 2.3 times higher. 

“If you talk to a mortgage banker, they will tell you that that's about what they want to see,” he said of the 2012 figure. 

Now, the disparity is so high that “it makes it a big challenge for a first time homebuyer who goes to their mortgage banker, they're trying to buy a house and there's very little inventory in the market that they can buy,” he said. “So that's a big challenge that we have to figure out how do we combat that.” 

Housing got a lot more expensive in the past year, and more people are buying mansions 

The average home sales price is up 18% year over year, coming in at nearly $475,000 as of August, Howard said. 

Also, more people are buying high-end homes.

Howard said sales of homes over $1 million are up almost 11%. 

“But the number that I think is most fascinating is in the last 12 months, we've sold over 102 houses over a million dollars in Hall County,” he said. “That's substantial for our community to sell houses at that price point. We've seen several houses over $3 million that have sold in our community.” 

“Last year, about 50% of the deals we did in the residential market were all cash or substantially cash, which is unbelievable,” he said. 

But that trend will likely cool down. 

“We will start to see a little bit of decline as the market changes,” he said. “That buyer is a little more discerning. … They are not as affected by the interest rates, but they may be affected in other ways through their own businesses, or what they might be investing in. So they're going to be a little more discerning moving forward, and we have seen some deals in those higher price points start to fall apart.” 

Builders are adapting to higher costs 

The cost of construction and infrastructure has risen so much, Howard said, that it makes it difficult for developers to build affordable homes while still returning a profit for investors. 

Rather than stay flat, profit margins have actually gone down, he said. 

“A custom builder wants to make about 20%, but … in some cases, they’ve gone down to single digits.” 

He said homebuilders are trying to make homes more affordable by reducing square footage or leaving out certain features and amenities. 

“Instead of 1,500 square feet, it’s a 1,200 square-foot house,” he said. “Instead of a porch, you just have a back patio.” 

“It’s trying to build houses and take things away but still have a good living space,” he said. “And there's a huge part of the consumer out there that's looking for that — they just need a roof over their head.”

The Associated Press contributed to this report.