Now for the news…. Nationally average home prices have increased by 2.3% in the June Index when compared to the previous month of May for the 20-City Composite report. The June index for Atlanta shows a 4.43% (non-seasonally adjusted) increase in home values from May 2012, which is very good news. That represents a 10.74% increase in home prices over the past three months. While these numbers are positive, we must bear in mind that home prices had dropped 23.17% over the prior 8-month period. From the peak of July 2007, homes values are down 32.78%. The current Case-Shiller index reflects values similar to home values in the fall of 1998. TheJune index for Atlanta is 91.74, which is up 4.43% from May 2012 and down 12.06% from June of 2011. Atlanta continues to show the largest drop in 2012 home values for any of the 20 markets tracked by Case-Shiller however current numbers do show improvement.
The metro Atlanta real estate market continues to show signs of improvement for sellers. Listing inventory is down 36.8% from July of 2011 and down 48.9% from July 2010. We have seen an extended period of low inventory since last year. Buyer activity is strong. In 2012, Trendgraphix reports closed sales up 13% compared to the same period in 2011. At the same time, the pace of pre-foreclosures (notices of default) and foreclosures has slowed. For the past four 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-June-2012-Index-Reported-August-2012
We have now seen three months in a row of positive results from the Case-Shiller Index. We expect to see a similar pattern for the reports that reflect July and Augist. 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. If you average the Case-Shiller Index for the past 12 months, we are down 33.72% 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 still below the normal trend line.
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 11.13%
Homes Bought in 2001 – Loss of 15.85%
Homes Bought in 2002 – Loss of 18.97%
Homes Bought in 2003 – Loss of 21.52%
Homes Bought in 2004 – Loss of 24.19%
Homes Bought in 2005 – Loss of 27.83%
Homes Bought in 2006 – Loss of 31.12%
Homes Bought in 2007 – Loss of 31.56%
Homes Bought in 2008 – Loss of 25.20%
Homes Bought in 2009 – Loss of 15.37%
Homes Bought in 2010 – Loss of 13.26%
Homes Bought in 2011 – Loss of 6.73%
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 13% 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 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 over 30% from the prior year levels. We expect inventory to remain at very low levels as we begin to move toward a seller’s 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 four 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 and lower price points.
You 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 over time. 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!
