This real estate update is courtesy of our broker, Prudential Georgia Realty, and its blog at atlscoop.com!
The latest Case-Shiller Index was published on Tuesday, July 30th 2013. As always, the index reports on data 60 days in arrears. Therefore, the index reports Metro Atlanta home values for May 2013. So what does the latest index show and what does that mean for home values in Metro Atlanta? Home values continue to improve in our market. However, two important considerations must be taken into account. First, the Case-Shiller index of home values is very different from average sale prices or median homes prices. The Case-Shiller Index reports on repeat properties sold, which are generally better indicators of home values. Second, this index reflects average home values for all of Metro Atlanta. Remember, real estate is local and every market is different. Your local Prudential Georgia Realty agent can help you understand the specific metrics in your local market.
Now for the news…. Average home prices for the National 20-City Index increased by 2.4% compared to last month and increased 12.2% over the past year. The April index for Metro Atlanta shows a 3.43% (non-seasonally adjusted) increase in home values from March 2013 and a 20.1% increase over the last year. While these numbers are positive, we must bear in mind that home prices are still down 22.65% from the peak of July 2007. The May index for Atlanta is 105.56. Phoenix, San Francisco, Las Vegas and Atlanta were the four cities with the highest year-over-year price increases. New York, Cleveland, Washington D.C., Charlotte, Dallas and Boston 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 18% from the bottom of February 2013. But this is still down 19% from 2012 and down 48% from 2011. That represents around 3.8 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, first time buyers and investors. 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. Your local PGR agent can show you the specific conditions in your market so you can make the best real estate decisions.
We have now seen positive results from the Case-Shiller Index for the last seven months and 13 of the last 14 months. Only October of 2012 was negative. What a change from a few years ago! As we see more summer results posted, we expect to see more positive results. As we move into the fall, we mat get mixed results. But the low inventory environment could break the normal pattern and drive prices higher. View the graph of the monthly Case-Shiller results from 2010, 2011, 2012 and 2013.
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!
This chart shows the “months supply” based upon price ranges. As you can see, the supply is very low in the lower price ranges. Some of this is due to heavy investor activity under $200,000. As you get to the luxury market, there is more supply available based on the rate of closed sales. Contact your local PGR agent to see the latest trends in your specific area.
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 2.26%
Homes Bought in 2001 – Loss of 3.17%
Homes Bought in 2002 – Loss of 6.76%
Homes Bought in 2003 – Loss of 9.70%
Homes Bought in 2004 – Loss of 12.77%
Homes Bought in 2005 – Loss of 16.95%
Homes Bought in 2006 – Loss of 20.74%
Homes Bought in 2007 – Loss of 21.26%
Homes Bought in 2008 – Loss of 13.93%
Homes Bought in 2009 – Loss of 2.62%
Homes Bought in 2010 – Loss of 0.20%
Homes Bought in 2011 – Gain of 7.32%
Homes Bought in 2012 – Gain of 16.36%
Homes Bought in 2001 – Loss of 3.17%
Homes Bought in 2002 – Loss of 6.76%
Homes Bought in 2003 – Loss of 9.70%
Homes Bought in 2004 – Loss of 12.77%
Homes Bought in 2005 – Loss of 16.95%
Homes Bought in 2006 – Loss of 20.74%
Homes Bought in 2007 – Loss of 21.26%
Homes Bought in 2008 – Loss of 13.93%
Homes Bought in 2009 – Loss of 2.62%
Homes Bought in 2010 – Loss of 0.20%
Homes Bought in 2011 – Gain of 7.32%
Homes Bought in 2012 – Gain of 16.36%
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: Demand is strong as buyers take advantage while prices remain below replacement costs and mortgage financing is historically low. Large investors are creating strong demand for rentable single family homes under $200,000. We will be watching that for a potential bubble. We continue to see significant pent-up demand for new household formation from first time buyers and a very active baby boomer market. We expect to see the return of the 1st and 2nd move-up buyer over the next few years. That will tell us that we have returned to a more normal demand cycle.
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 the 5% range in 2014. In 3-5 years, we expect to see rates in the 6-8% range again.
Supply/ Inventory Levels: Most of 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.
New Homes Make A Comeback: New Home starts are rising and will slowly but surely become a major factor for Metro Atlanta real estate. In 3-5 years, we expect New Homes to return to just under 50% of the inventory and closed sales. For resale owners, your competition will shift from foreclosures & short sales to new homes.
It is clear that the housing market for the Greater Metro Atlanta area is improving. Right now, we still have low prices and incredible mortgage rates. But the trends for mortgage rates are upward and home prices are increasing. Many buyers and sellers need to act quickly before their buying power in impacted significantly. In 5 or 10 years, many will look back and regret not buying their dream home when they had the chance! The cost of waiting could be quite significant. Check back for our next posts with the latest facts and insight that can make you money!
Lake Sidney Lanier Homes is the most comprehensive online source for information on Lake Lanier homes for sale and Lake Lanier area real estate. View the latest Lake Lanier home listings, foreclosures, lots, land, sales trends and real estate topics on Lake Lanier. Arthur Prescott is an Accredited Buyer's Representative and Certified Residential Specialist with over a decade of Lake Lanier real estate experience. If you would like to schedule a free buyer or seller consultation, please feel free to contact us directly at 678-513-2014 or email us at APrescott@PrudentialGeorgia.com.
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