On Lula Road, an investor is remodeling a modest home to sell it at a loss.
It’s not much of a business model, but the investor isn’t in it for the money — Hall County government is working on the house at 5516 Lula Road to sell it through the Neighborhood Stabilization Program.
The program is intended to work as a two-for-one boost for county neighborhoods. By buying foreclosed homes from banks — usually blighted homes or homes in blighted neighborhoods — the county can work to turn around a troubled area and, at the end of the remodel, provide an affordable home to eligible buyers of moderate income.
NSP was launched to respond to the 2008 housing bubble collapse with a $3 million grant from the federal government that went into a revolving loan fund. No county money has been used in the project, and payments from home sales go back into the fund to be used on the next house.
County managers target “homes that people do not want anymore; they’re neglected,” said Hall County Grants Manager Nancy Smallwood. “The banks have had them for several years on their books.”
Home prices involved in the program have ranged between $135,000 and $202,000, according to Smallwood.
With 77 homes purchased and the county not allowed to sell property above market value — often losing money on the sales given the amount of work the homes need, according to program managers — there’s only about $671,000 left in the fund.
That’s by design, said Hall County Finance Director Zachary Propes. Hall County and the federal government didn’t intend to be a permanent player in the local real estate market, but to try to cushion the landing of plummeting prices, especially in low-income areas where being underwater on a mortgage could cause deep damage to first-time homeowners.
But as the program winds down — the county is remodeling only three homes this year — the area is facing a different sort of housing crisis among those with moderate incomes and first-time buyers.
There are 19 homes on the market for $100,000 in Hall County; most are mobile homes. There are 169 homes available for between $100,000 and $200,000, standard starter-home prices for the area.
If no new houses went on the market starting today, they’d all be gone in about a month — a big problem for a county of 200,000 people.
Homeowners looking to sell are sitting pretty in the current market, but it’s unhealthy for the county, argues Berkshire Hathaway real estate agent Robby Williams.
Property values are on a hard upswing. Developers are pulling building permits to construct new homes to fill demand, but most are targeting the housing market above $250,000.
The market is putting buyers of moderate income and first-time homebuyers in a tough position.
“They’ve got a perception that they can get one thing, and then when they get into the market they realize they can’t,” Williams said. “This is kind of the cycle we’re seeing: They get discouraged, then they get a little bit desperate — not everybody but a lot of them — and then they end up jumping on one.”
“... Especially from about $150,000 and below, they’ll make an offer on a home that’s been on the market for 18 hours and before their offer can be considered heavily, there’ll be three or four more offers on a property.”
Rapid-fire offers on homes means sellers can make decisions based not only on price but background of potential buyers, and those with weaker financing or less earnest money are hitting a wall.
“We can argue all day over whether that’s their fault or not, but it is what it is,” Williams said of first-time buyers and those with weaker financing. “... I think that they are at a disadvantage.”
There are a few reasons why things are happening the way they are, he said.
First, interest rates remain “historically still very low” as the market improves, creating a “mad dash of people who have been sitting on the fence” but who now want to own a home.
Second, population has continued to grow without much new construction. Building permits are being issued at much higher rates than in previous years, but that doesn’t do much for people looking to buy a home now, especially if builders are focusing on high-end homes.
Third, people whose credit was ruined in the financial crisis have “come out of the penalty box,” Williams said. They’ve recovered their credit scores and after renting are ready to once again own a home.
Fourth — and this is where the Realtor said he’s most frustrated — people who have benefitted from rising prices are looking to sell their homes and move up but can’t.
“They’re excited for what their home is worth today, but when they look at what’s out there for them to choose from for their next step, they get discouraged,” he said. “They won’t even put their house on the market.”
And keeping those people on the sidelines means the market stays tighter for longer.
As that pressure among first-time buyers and people in the middle of the pack keeps building, more and more people will look for homes outside of the county. Williams said he’s sold five homes in the past 120 days in Jackson County, an area he’s not pursued business in the past.
“They started looking in Hall, they ended up in Jackson because they could get more for their money there,” he said. “I think that may be what we see. We may see people push out maybe to the more rural East Hall area and the Jackson, Banks County area.”