The latest Case-Shiller Index was published on September 25, 2012. As always, the index reports on data 60 days in arrears. Therefore, the index reports Metro Atlanta home values for July 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…. Nationally average home prices have increased by 1.5% in the July Index when compared to the previous month of June for the 20-City Composite report. The July index for Atlanta shows a 2.62% (non-seasonally adjusted) increase in home values from June 2012, which is very good news. That represents a 13.4% increase in home prices over the past four months. While these numbers are positive, we must bear in mind that home prices had dropped 23.19% over the prior 8-month period. From the peak of July 2007, homes values are down 31.01%. The current Case-Shiller index reflects values similar to home values in the spring of 1999. The July index for Atlanta is 94.15, which is up 2.62% from June 2012 and down 9.95% from July 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 34.6% from August of 2011 and down 49.4% from August 2010. That represents a 4.4 month 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. In 2012, Trendgraphix reports closed sales up 12% compared to the same period in 2011. At the same time, the pace of pre-foreclosures (notices of default) and foreclosures has slowed. RealValuator reports that market sales (resales, new homes) are outpacing 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:
We have now seen four months in a row of positive results from the Case-Shiller Index. We expect to see a similar pattern for the reports that reflect August and September. Going into the fall and winter months, we may see results that are flat or slightly negative. We are moving back to a more normal seasonal pattern where the spring and summer months are the heaviest selling months. 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. 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!
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 8.03%
Homes Bought in 2001 – Loss of 13.63%
Homes Bought in 2002 – Loss of 16.84%
Homes Bought in 2003 – Loss of 19.46%
Homes Bought in 2004 – Loss of 22.20%
Homes Bought in 2005 – Loss of 25.93%
Homes Bought in 2006 – Loss of 29.31%
Homes Bought in 2007 – Loss of 29.77%
Homes Bought in 2008 – Loss of 23.23%
Homes Bought in 2009 – Loss of 13.15%
Homes Bought in 2010 – Loss of 10.98%
Homes Bought in 2011 – Loss of 4.28%
Homes Bought in 2001 – Loss of 13.63%
Homes Bought in 2002 – Loss of 16.84%
Homes Bought in 2003 – Loss of 19.46%
Homes Bought in 2004 – Loss of 22.20%
Homes Bought in 2005 – Loss of 25.93%
Homes Bought in 2006 – Loss of 29.31%
Homes Bought in 2007 – Loss of 29.77%
Homes Bought in 2008 – Loss of 23.23%
Homes Bought in 2009 – Loss of 13.15%
Homes Bought in 2010 – Loss of 10.98%
Homes Bought in 2011 – Loss of 4.28%
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: 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 12% from 2011.
Mortgage Rates/ Credit Availability: Average mortgage rates in the past 50 years were 8%. We expect to see historically low mortgage rates continue now that the Fed has announced a new program to purchase mortgage-backed securities. But this stimulus to keep rates artificially low will not last forever. Freddie Mac predicts mortgage rates to rise in 2013. 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 over 30% from the prior year levels. We see investors very active under $200,000 which will substantially shrink that inventory. New homes will continue to grow but not fast enough to have a significant impact on inventory levels. 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 2011, short sales and foreclosures were over 60% of the transactions sold. In 2012, this activity is down 50% from last year. We are now seeing resales and new homes outpace the sales of bank-owned properties. We expect to see some “shadow inventory” coming in late 2012 and early 2013. However, most of this will be concentrated in specific areas and lower price points.
You and your agent should be carefully watching the trends for short sales and foreclosures. The policies that streamline short sales will continue to impact our market. The good news is that these policies will help us get through our supply of distressed properties faster. The bad news is that these properties tend to be sold below market value which will keep appraisals and the overall market prices lower than normal. Yes, we will continue to see some ups and downs along the way, but home values will rise over time. 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!
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