Boomers love this housing market, baby!

http://new.savannahnow.com/node/145412

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Bursting bubbles, cooling markets and tumbling housing starts are just a few of the metaphors used to describe the latest figures in the national housing market.

Those same metaphors wouldn't apply here, said many people involved in Savannah real estate.

"It's like the old Mark Twain quote - news of the (housing market's) demise is greatly exaggerated," said Chuck Mitchell, member of Maloney, Mitchell & Denton Commercial Properties.

Mitchell, who has 23 years of experience in the Savannah market, believes the area has many advantages that provide a cushion from the national downturn.

Paramount among them is that the region is proving popular with baby boomers - Americans born from 1946 to 1964 - who are retiring here or purchasing homes in anticipation of retirement.

What do the numbers say?

On all other fronts, the national numbers reveal a housing slowdown.

Here are some hard numbers:

On Monday, the National Association of Realtors reported annual existing home prices declined in August for the first time in more than a decade. It was the fifth straight monthly decline and left sales 12.6 percent below the pace of just a year ago.

According to the U.S. Census Bureau, new housing starts fell 6 percent in August - from 1.77 in July to 1.67 in August. This puts housing starts at roughly 20 percent below where they were last year.

Further, housing permits - seen as a sign of confidence in the market - fell from 1.76 in July to 1.72 in August.

The National Association of Home Builders said in a press release concerning a September survey, its members' confidence dropped three points suffered from August and stands at its lowest point since February 1991.

"The data I have seen has shown that every major geographic region in the country has seen some drop in building permits as of July," Mitchell said.

In Savannah, those numbers are headed in the opposite direction.

The area saw an increase in building permits through July of roughly 5 percent, according to Mitchell.

He also said numbers generated locally show a building permit increase of about 3 percent through Sept. 8.

"The number one thing fueling this market is that people are buying retirement homes or second homes here. People between the ages of 45 and 64 account for a largest portion of home sales in the region," Mitchell said.

Michael Toma, associate professor of economics at Armstrong Atlantic State University and director of Armstrong's Center for Regional Analysis, agreed.

"Savannah's tourist industry brings in about 6 million people a year and many of them are well-educated and affluent," he said.

That traffic, according to Toma, acts something like an advertisement for people to retire on the coast.

"I've not seen any statistical data that suggest that the Savannah market is going down," Toma said. "The rate of growth has slowed, but the market is still growing."

Phyllis Isley, director of the Bureau of Business Research & Economic Development at Georgia Southern University, said she had no hard numbers to support whether the baby boomer buying boom is driving the coastal housing market.

"The only hard numbers we have are from the 2000 U.S. Census. The rest is projection. The numbers we do have indicate that retirees are skipping the coast and settling along the I-75 corridor," she said.

Isley was quick to point out the census numbers are six years old and that developers may be anticipating the first-wave of baby-boom retirement five years from now.

"As an economist, I can tell you that the people on the ground - those who are actually building the houses - know more than we do," she said. "Local housing values have remained strong, so that would indicate that there is a steady demand."

Cooling off, heating up

The real estate market has accelerated rapidly over the last five years and those areas that were the hottest, - Florida and California - are cooling the fastest, according to Richard DeKaser, chief economist with Nation City Corp., a financial holding company.

Nation City releases a quarterly estimate of how much real-estate markets in metropolitan areas are over- or undervalued.

"We don't consider a market to be at risk until it is overvalued at about 34 percent," DeKaser said. "So I think Savannah is pricey, but not risky."

The company's most recent report, released Sept. 20 for the second quarter of this year, has Savannah overvalued at 25.3 percent, up from the first quarter at 22.9 percent.

This data also estimates the medium price of a single-family home in the area to be roughly $147,000 in the second quarter, up from $143,000 in the first.

Toma, though admitting he's not thoroughly familiar with how these numbers are compiled, offered a caveat.

"Usually this (overvalue) is based on household income and population, and does not take into account the people who are moving here or buying a retirement home," he said.

Toma also said it is very difficult to find data about consumers who purchase directly from builders.

Bulls, not bears

Harvey Gilbert, president of Gilbert Realty Co. LLC., who has 25 years in real-estate development and consulting, said he believes the market is in equilibrium now. He is bullish on its long-term prospects.

Gilbert credits the region's economy as well as its appeal to baby boomers with keeping the market together and growing.

"The vibrant economy and the tremendous number of baby boomers - pre-retiring or retiring - have kept our market in equilibrium relative to other regions of the country," he said.

He pointed to the projected 38,000 permitted units to be built over the next 15-20 years near the Interstate 16 and I-95 intersections in West Chatham County.

"This represents tremendous growth," he said.

Bill Lattimore, president of the Lattimore Company and Coastal Market Graphics, both Savannah-based companies that respectively develop and research the local real estate market, shares Gilbert's enthusiasm.

He has identified four strengths that he believes bode well for the future.

First, the Savannah area has not seen the exaggerated price inflation of other parts of the country.

Second, the areas from Hilton Head Island, S.C., to the Georgia/Florida state line have proven to have great appeal to baby boomers and pre-retirees, exactly the group Mitchell and Gilbert credit with driving the market.

Third, national builders have entered the market here, bringing with them large marketing budgets.

Fourth, there has been an increase in jobs in the region so families are moving to the area.

"If the world holds together," Lattimore said, "I'm bullish on the real-estate market."