… The July index
for Metro Atlanta shows a 2.2% (non-seasonally adjusted) increase in home
values from June 2013 and an 18.5% increase over the last year. While these
numbers are positive, we must bear in mind that home prices are still down
18.27% from the peak of July 2007. The July index for Atlanta is 111.54.
All 20 cities measure in the index showed positive gains over the past year. San
Diego, San Francisco, Los Angeles, Las Vegas and Atlanta were the five cities
with the highest year-over-year price increases. New York, Cleveland, and
Washington D.C. showed the smallest year-over-year improvements.
The Metro
Atlanta real estate market continues to show signs of improvement for sellers. Listing
inventory is up 24.8% from the bottom of February 2013. But this is still
down 6.3% from 2012 and down 41% from 2011. That represents around 4
months supply of inventory based upon the latest closed sales trend. Six months
supply is considered normal. We have seen an extended period of low inventory
since last year. Buyer activity remains strong led by baby boomers and
first-time buyers. At the same time, the pace of pre-foreclosures (notices of
default) and foreclosures has slowed. RealValuator reports that short sales
and foreclosures were over 60% of the transactions sold in 2010 but are now
down to under 30% in 2013. Market sales (resales, new homes) are outpacing
bank-owned sales. New Homes are starting to make a comeback with Smart Numbers
reporting a 55% increase in closed sales from the last quarter. In the next few
years, new homes will become a more significant part of the inventory and
closed sales…
…If you look
back further at home values (see chart below), you can see that we had a bubble
in homes values. As with many cyclical markets, we have over-corrected with
values that are below the normal trend line. Over time, we expect this pattern
to normalize and values will return to this predictable track. That makes now a
great time to buy or invest in real estate for Metro Atlanta – BUT don’t wait
too long!
If you look at
the average annual Case-Shiller index for each year, here is how homes
purchased in recent years would compare to the current index:
Homes Bought in
2000 – Gain 8.05%
Homes Bought in 2001 – Gain of 2.32%
Homes Bought in 2002 – Loss of 1.48%
Homes Bought in 2003 – Loss of 4.58%
Homes Bought in 2004 – Loss of 7.83%
Homes Bought in 2005 – Loss of 12.25%
Homes Bought in 2006 – Loss of 16.25%
Homes Bought in 2007 – Loss of 16.79%
Homes Bought in 2008 – Loss of 9.05%
Homes Bought in 2009 – Gain of 2.89% (the year Where to Invest US
started buying in Atlanta)
Homes Bought in 2010 – Gain of 5.46%
Homes Bought in 2011 – Gain of 13.40%
Homes Bought in 2012 – Gain of 22.96%
Yes, we are
slowly climbing our way out of this unprecedented housing crisis – but we are
not quite there yet. So where will home values go from here? The key factors
that will impact our home values include the following:
Demand from
Buyers:
The long-term trend for buyer demand is strong as buyers take advantage while prices
remain below replacement costs and mortgage financing is historically low.
We continue to see significant pent-up demand for new household formation from
first time buyers and a very active baby boomer market. But the large
investors have recently slowed their buying patterns for properties under
$100,000. This has returned that market to more normal levels of demand. We
will be watching the buyer demand trends closely to determine of we have
anything other than the normal seasonal trend.
Mortgage Rates/
Credit Availability:
Average mortgage rates in the past 50 years were 8%. Rates remain historically
low but the long-term trend is higher. Freddie Mac and the Mortgage Bankers
Association predict mortgage rates to rise to over 5% in 2014. In 3-5
years, we expect to see rates in the 6-8% range again.
Supply/
Inventory Levels:
Despite the increase in inventory over the past few months, our markets are
showing inventory levels down significantly from the prior year levels. New
homes will continue to grow but not fast enough to have a significant impact on
inventory levels in the short-term. As values begin to rise, we expect
“sideline sellers” to get back into the market. Overall, the “for sale”
inventory will remain low compared to normal levels.
Competition from
Short Sales/ Foreclosures: In 2010, RealValuator reports that short sales and
foreclosures were over 60% of the transactions sold but have dropped to under
30% in 2013. We are now seeing resales and new homes outpace the sales of
bank-owned properties.
Source: atlrealestatescoop.com
