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Atlanta Sales Volume Down But Prices Hold Hold Steady - For Now - 2007-09-15 |
The recent media meltdown over subprime mortgages served to focus public attention like a laser beam on the current residential real estate slowdown. But the subsequent arrival of Hurricane Dean shifted the media's gaze, and things don't look quite as bad as they did when the spotlight was on.
The Office of Federal Housing Enterprise Oversight (ofheo.gov) recently released its national Housing Price Index, called the HPI. The most current survey covers sales and refinance information for the period ending June 30 of this year, so it's likely the best information available.
In addition, the HPI is widely regarded as the broadest measure of housing price movement. That's because it reflects appraisal information for all Fannie Mae and Freddie Mac loans, including both sales and refinancing. So even if a neighborhood has only a small number of sales, there are likely many homeowners who have chosen to stay put and refinance. Only in the HPI are these transactions reflected as well as sales data.
The nation as a whole saw prices in the second quarter of 2007 approximately 3.2 percent higher than they were a year ago, with a national gain of only one tenth of one percent from the first quarter of this year. Many pundits had predicted that a substantial drop in home values would be indicated, but the numbers told a different tale. Even so, this gain represents the smallest increase in year-over year prices since 1996-97.
We should remember that almost 70 percent of homes in America are owned by the head of household in that particular family. So if a seller can't get at least as much as they paid for a house, they often decide to take the home off the market and just stay. This has a strong stabilizing effect on prices.
Prices in Georgia as a whole fared better than the national average, with an increase in home prices of 4.64% from a year ago. And while prices inched up from the first quarter by only half a percent, that is larger than the nation managed. Georgia ranked twenty-third in appreciation.
So where is this massive decline in prices that we had all been led to believe was surely on its way?
Out west, California and Nevada showed annual declines of less than two percent. Avoiding that fate was formerly red-hot Florida, inching out an annual appreciation rate of 1.29 percent. That surprised even me.
The New England states of Rhode Island and Massachusetts each saw statistically insignificant drops of less than one percent each. And finally rust-belt Michigan dropped 1.42 percent.
One interesting result of this most recent survey is that 18 of the 20 cities showing the lowest appreciation nationwide were located in either Florida or California. It seems that price declines are largely limited to those areas which experienced the most unrealistic price run-ups in the recent past.
What does all this mean to you and me?
Well, one of the significant outcomes of this survey is that the residential real estate market is not as bad off as the media would have us believe.
Yes, there has been a significant tightening of credit policies over the
past few months, and yes, it is harder for marginally qualified first time buyers and big spenders to get a loan, but that has not caused prices to go down in most of America.
And yes, we are experiencing a dramatic increase in the number of homes being foreclosed by lenders. In fact, in the 13 county metro Atlanta area, we have seen the number of homes advertised as going into foreclosure more than triple since 2000, when over 15,000 homes were advertised. Yes, I predict we will see more than 50,000 homes listed in foreclosure publications this year, but no, that fact has not caused homes in Atlanta to decline in value.
And yes, the housing boom is over and buyers seem to have lost interest in buying homes. Sales volume in metro Atlanta is off some 30% from where it was this time last year, and that's not good. But even so, that lack of buyer interest has not sparked a drop in prices in the Atlanta area, at least so far.
The fact is that all real estate is local. What's happening in Michigan or Rhode Island has little impact on our market here.
Instead, the Atlanta Regional Commission has forecast that our local population will rise from an estimated 5 million people today to almost 7 million by the year 2030. And each one of those new residents will need some place to live, whether it's a renovated house, an apartment building, or a mansion on the Chattahoochee River.
If the ARC is right, we'll need a lot of new construction over the next couple decades, and that bodes well for the future.
For now, all we can say for sure is that housing prices remain basically flat and sales are still well below our boom highs. Let's hope that this is the worst we see.
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BUYING FORECLOSURES IN GEORGIA
NEW for 2008: Bank-Owned Home Bonanza
This seminar has been updated and revised for 2008 to reflect the dramatic changes in the Georgia foreclosure marketplace. We are literally facing a flood of foreclosure properties, and there is profit to be made in each and every one of these homes.
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