2015 best year in local real estate sales since recession but will it continue in 2016?

By Natalie Simms
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With just over a $20 million increase in total home sales volume, it seems 2015 was a good year for the Rome/Floyd County real estate market. But with an increase in interest rates, a presidential election and more legislation, this new year might not see the same kind of growth.

“In 2015, $118,499,832 worth of residential real estate traded hands with the help of real estate agents,” says Jason Free, Realtor and general manager of Keller Williams Realty. Free is also a past president of the Greater Rome Board of Realtors.

“We finished the year with an average sales price of $132,770. In 2014, the average sales price was $125,553 and the average sales price for 2013 was $114,044.”

The 2015 total sales volume is $20,379,632 more than the 2014 sales total of $98,120,200 according to the Georgia Multiple Listing report for Rome/Floyd County. A total of 883 homes were sold in 2015, an increase of 11.9% over the 2014 total of 789 homes.

“The largest number of closings this past year came in May, June and July which is the result of an active spring. That is fairly typical of our market. When the weather starts to warm up, flowers start blooming, daylight saving kicks in and people want to look at houses,” says Free. “That is also the time of year that buyers have tax refund checks in their pocket, which makes the down payment and closing cost a little easier.”

Free says he believes consumer confidence has been one of the biggest contributing factors to this year’s growth.

“We’ve also had fewer foreclosures which led to the increase in prices,” he says.

Local mortgage lenders say they have also seen a big year of growth in their industry, probably the best year since 2008. Karren Green and Sonya Blankenship with Heritage First Bank both agree that consumers “feel better about the economy”.

“The mortgage industry has been very busy with purchases this entire year. This year our volume is up considerably from the most recent previous years. The consumers appear to feel a lot better about the economy in Rome, GA and they have been looking for houses and buying as a result,” says Green, vice president of Mortgage Lending at HFB.

Blankenship, vice president at HFB, agrees with Green. “The mortgage and real estate industry, as a whole, experienced a much improved 2015 over the previous few years. Markets show 2015 to the best real estate market since 2008. We have seen significant improvements in the economy due to the fact, long term rates held extremely low for the year, home values began to increase caused by a decrease in foreclosed homes, increase in sales and purchases, as well as new construction picking up. Now is a great time to buy or sell.”

What’s ahead for 2016?

Just last month, the Fed raised the interest rate .25 of a point, the first increase in nine years, according to Free.

“I don’t think (it) …. will have an adverse affect on the market. It should have a positive impact on the market. As rates start to increase, people get motivated to buy while they can afford more house for their money,” he says.

“The Fed has been at 0% for nine years and everyone who bought homes during that time has been able to take advantage of historically low rates anywhere from 3 to 4.5%. The Fed has indicated that this is the first bump and there will likely be three more increases in the rate over 2016. Rates could be up 1.25% by the end of 2016, and perhaps 2.25% by the end of 2017. If the market remains healthy rates could normalize in 2018 around 7 to 8%. They will not increase the rate unless the market continues to improve.”

Green believes the hike will help get buyers “off the fence” to make a move.

“The interest rate hikes generally assist in getting buyers that have been ‘on the fence’ to make a move and get a home. The rates are still low enough to allow buyers to afford a good home with a low monthly payment. We do anticipate rates to rise some in 2016, but at the same time expect they will still be low enough to attract buyers,” she says.

Blankenship says this year may be even better than 2015 despite the increasing mortgage rates.

“Markets indicate 2016 to be a better year than 2015 even with the chance of rates increasing slightly. I would agree and the reason why is this; rates are tied to mortgage bonds and inflation is the archenemy of bonds, so low inflation is good for bonds and rates,” she says. “However, once velocity increases, the excess money in the system will cause inflation – which is bad for rates, since even the slightest scent of inflation can cause home loan rates to worsen.

“While we certainly want to see a better economy in the near future, we have to remember that there’s an inverse relationship between good economic news and bonds and home loan rates. Weak economic news normally causes money to flow out of stocks and into bonds, which helps bonds and home loan rates improve. Strong economic news, on the other hand, normally has the opposite result.

“Currently, home loan rates remain at a low level, but that situation won’t last forever. That means now is an ideal time to purchase a home or refinance before the velocity of money – and rates – change.”

Aside from the increase in mortgage rates, Free believes the presidential election will also have a big impact on the local market.

“It’s a presidential election year. That typically means investors will be cautious with their money. That could result in a sluggish job market, which often translates into buyers waiting out the uncertainty,” he says.

“I think that 2016 will be a very stable real estate market but I don’t expect us to see the growth in sales volume and increase in average sales price that we saw in 2015.”