Lake Lanier Real Estate Owners Should Still Be Aware Of The Case-Shiller Index

Okay, before you start in on me, I understand that all real estate is local and that means that Lake Lanier real estate is not the same as Metro Atlanta real estate.  But to say that the two are not somewhat linked would be silly.  I believe that the two are linked by proximity, buyer/seller attitudes, primary and secondary homes, affordability, etc.  Many if not most of my sales on Lake Lanier over the past eleven years have been to Atlanta residents looking for getaway homes.  Many of those buyers eventually sell their Atlanta homes and move to their getaway.  By the same token, many also eventually sell their investment at Lake Lanier and return solely to their primary residence in Atlanta.

Because of the links, I would like to share the Case-Shiller Index Report for the Metro Atlanta area as published by Prudential Georgia Realty in our ATLscoop blog.  Try to pay attention and not doze off!  There is a lot of information in this report that could educate us on why the Lake Lanier real estate market is performing at its current state.  If your lake home is currently listed for sale, and you are wondering why it hasn't sold, this report could be of value as it represents the current state of many potential buyers of your lake home, as they reside in Metro Atlanta.

Case-Shiller Index Reported June 2012

June 26th, 2012

The latest Case-Shiller Index was published on June 26, 2012. As always, the index reports on data 60 days in arrears. Therefore, the index reports Metro Atlanta home values for April 2012. So what does the latest index show and what does that mean for home values in metro Atlanta? Things are improving 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 and other factors which are generally better indicators of home values. Second, this index reflects the average home values for all of Metro Atlanta. Remember, real estate is local and every market is different. There are some local communities that have held their values reasonably well and others that may continue to decline. In fact, some homes entering the market are getting multiple offers and closed prices above list price. Your local Prudential Georgia Realty agent can help you understand the specific metrics in your local market. However, the Case-Shiller Index is a good general indication on what is happening in our market.
Now for the news…. The good news is that the April index for Atlanta shows a 2.35% increase in home values from March 2012. Atlanta’s increase in home values is higher than the national average of 1.3%. These new numbers indicate a firming of the market in a positive direction. The current Case-Shiller index reflects values similar to home values in the spring of 1997. The April index is 84.5, which is up 2.35% from March 2012 and down 17% from April of 2011. Atlanta continues to show the largest drop in 2012 home values for any of the 20 markets tracked by Case-Shiller.
The metro Atlanta real estate market continues to show signs of improvement for sellers. Listing inventory is down 36% from May of 2011. We have seen an extended period of low inventory since last year. Buyer activity is strong. In 2012, Trendgraphix reports closed sales up 15% compared to 2011. At the same time, the pace of pre-foreclosures (notices of default) and foreclosures has slowed. For the past three months, RealValuator reports that market sales (resales, new homes) have outpaced bank-owned sales. Your local PGR agent can show you the specific conditions in your market so you can make the best real estate decisions.
Click on the link below to open the Excel spreadsheet that shows the details of the latest index:

Case-Shiller-Index-Atlanta-April-2012-Index-Reported-June-2012

The peak of our market was July of 2007 according to the Case-Shiller index. Since July of 2007, our homes values have slipped 38.08%. We are already seeing slight increases over the spring and the real story is if these numbers stand firm after the traditional selling seasons of spring and summer passes. If you average the Case-Shiller Index for the past 12 months, we are down 32.04% from the peak. We believe it is more effective to use the ”average of the past 12 months” or “trailing 12 months” as an indicator instead of reacting to a specific month. View the graph of the latest Case-Shiller results from 2010, 2011 and 2012:

If you look back further at home values (see chart below), you can see that we had a bubble in homes values but they are actually now below the normal trend line.

Recently, we have seen mortgage rates dip back to historic lows. The Fed has extended “Operation Twist” which is a program intended to keep 30-year rates low. But mortgage rates are impacted by more factors than just interest rates. There are major legislative issues and other economic factors that could cause mortgage rates to rise. For example, the proposed legislation for QRM (Qualified Residential Mortgages) will require mortgage companies to hold back 5% in capital reserves for every loan. That is expected to be funded by higher mortgage rates. Right now, there is an incredible window of opportunity to buy the home of your dreams and set a future mortgage rate that we will not likely see again in our lifetimes.
It appears that we may have reached the bottom of the housing market and future demand for housing is strong. We expect to see annual home values slowly increase over time with a few bumps along the way. Prior to the real estate recession, Case-Shiller reports an average annual appreciation of 4%. In 2013 or 2014, we expect to see a seller’s market return with higher than normal appreciation for a few years. In fact, we are already seeing that in some of our local markets right now. Contact us to learn more about future predictions and how that impacts your decisions.

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 – Loss of 18.15%
Homes Bought in 2001 – Loss of 22.49%
Homes Bought in 2002 – Loss of 25.36%
Homes Bought in 2003 – Loss of 27.71%
Homes Bought in 2004 – Loss of 30.17%
Homes Bought in 2005 – Loss of 33.52%
Homes Bought in 2006 – Loss of 36.56%
Homes Bought in 2007 – Loss of 36.97%
Homes Bought in 2008 – Loss of 31.10%
Homes Bought in 2009 – Loss of 22.05%
Homes Bought in 2010 – Loss of 20.11%
Homes Bought in 2011 – Loss of 14.09%

Yes, we are slowly climbing our way out of this unprecedented housing crisis – but we are not 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: We finished 2011 with over 70,000 homes purchased – a 20% increase from 2010. The activity is very strong so far in 2012 with closings up 15% from 2011.

Mortgage Rates/ Credit Availability: Average mortgage rates in the past 50 years were 8%. We expect to see historically low mortgage rates this summer and expect to see rates start rising during the 2nd half of 2012 and into 2013. Freddie Mac predicts mortgage rates of over 5% next year. In 3-5 years, we expect to see rates in the 6-8% range.
Supply/ Inventory Levels: Most of our markets are showing inventory levels down 25% – 30% from the prior year levels. We expect inventory to remain at very low levels as we begin to move toward a sellers market.
Competition from Short Sales/ Foreclosures: In 2011, short sales and foreclosures were over 60% of the transactions sold. In 2012, this activity is down 50% from last year. For the last three months, we are now seeing resales and new homes outpace the sales of bank-owned properties. We expect to see more shadow inventory coming in late 2012 and early 2013. However, most of this will be concentrated in specific areas.
You and your agent should be carefully watching the trends for short sales and foreclosures. Yes, we will continue to see some ups and downs along the way, but home values will rise again. In a few years, short sales and foreclosures will return to normal levels. The new homes inventory will remain low. That means we will see an undersupply of homes for sale and values will begin to rise. In 5 or 10 years, many will look back and regret not buying their dream home when they had the chance! Check back for our next posts with the latest facts and insight that can make you money!