Just what kind of real estate market is this?
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I’ve recently had several people ask me how the real estate market is in metro Atlanta. My response is business is going well and the market is doing fine. But how can that be, they proclaim. We keep hearing on the news and reading in the paper about how the housing market is going to implode, what with the sub-prime mortgage fallout and the resetting of adjustable rate mortgages and all these homes for sale.
First of all, I would say that reading newspapers has always been proven to be hazardous. Much of the negativity in the housing market was not even based in Atlanta when the press here was reporting on it. It was driven from markets such as Florida, California, Arizona and Nevada. It slowly crept into our market and we are now seeing a slowdown pretty much throughout the US. The slowdown is always magnified in the summer, as more homes are listed. Typically, the buyers are busier in the summer as well, so the absorption rate increases and the inventory level stays reasonable.
The buyers are all reading in the paper that it’s a buyer’s market and are looking for deals and looking for the perfect home. The sellers are, for the most part, not budging. Atlanta is also a very transient town, with more people moving here than moving away. From working with relocation clients, they’re often having difficulty selling their home in another state, so they can’t purchase a new home in Atlanta. This is just one example of issues affecting the Atlanta market that actually aren’t a direct result of our own market.
The housing market in metro Atlanta could be better, but the major pressure is on the builders. There is clearly an over-supply of new homes on the market. As typically happens in a hot market, the builders overextend and build more spec homes to meet demand. When the market cools, it smacks them in the face pretty quickly. The other thing impacting builders is the trend for more upscale housing. The more expensive the homes, the longer it typically takes to sell. As a result, we’ve already seen quite a few builders declare bankruptcy. So as a word of advice, if you or anyone you know is looking at new construction, be sure to do your due diligence and check into the financial status of the builder.
There is also a lot of concern about the housing market due to the sub-prime loan issues as well as adjustable rate mortgages readjusting to a higher rate, as mentioned above. The expectation is that we will continue to see a rise in foreclosures in Atlanta and since we’re always a leader in foreclosures in the nation, it never bodes well for the market.
On the resale side, the market is doing pretty well. Obviously, the higher price point will always take longer to sell on average. The other area of concern is the condo market. People have struggled to sell condos for a couple years now, but that has in no way slowed the amount of builders starting new projects. The larger the condo building, the harder it becomes to sell. Condo projects typically tend to be more transient and as a result you see people trying to sell after only living there a couple years and that just doesn’t work without losing money. There has also been some speculation going on in the condo market here, as became wildly popular in Florida, to see if people could buy into the latest hot project and make a quick buck. Atlantic Station is one example where there was some quick money made there initially, but now the prices have really dropped. Part of that is a function of building in urban areas. In urban redevelopments, it often takes longer to improve the general area than people expect. As crime returns to an area, people get a little skittish.
All in all, the issues in Atlanta are not any different than elsewhere and in many cases much better. Everyone seems to be flocking out of Florida due to property taxes and insurance (or lack thereof), which will help increase the absorption rate here (if they can sell their home there). I’ve also talked to a lot of people from the Northeast who are opting to move here instead of Florida due to the issues there. Our inventory levels are higher than normal, which will take awhile to burn off, but it will be fine. The important thing in this market is to have a good agent, make sure that home is priced attractively and marketed heavily. Barring any spike in interest rates, I would expect the market to be much better next year.
What does this all of this mean, though? Is it a good market or a bad market? A buyers market or a sellers market?
Tomorrow, I’ll give you some real life examples to further elaborate. Oh, and if I don’t get to it tomorrow that just means I’m really busy selling houses (hint).
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