Atlanta home prices up 10.6 percent in year; is low supply creating a bubble?

Home sellers can rejoice: Atlanta’s spring buying season started in March with a 10 percent jump from last year in the price of homes sold.

The median price of a home sold last month was $220,000 – a 10.6 percent increase from the same month a year ago with the number of sales increasingly modestly, according to a report issued Friday by Re/Max of Georgia.

But buyer beware. From your viewpoint, the news looks a little less rosy.

Prices are being relentlessly driven higher by a shortfall in inventory – that is, the number of homes for sale. That means ever-more stretching to cover costs or ever-more modest options in home size, quality and location. And it means ever-shorter periods in which property is on the market and ever-more competition among buyers for the more desirable homes.

Re/Max considers a six month supply to represent a market in balance. Some experts say seven is better.

But balance-wise, inventory has been moving in the wrong direction. Re/Max says that the supply of homes for sale last month represented just 2.1 months of sales. That compares to last year’s 3.0 months of supply – which, at the time, was considered abysmally low.

"There continues to be a growing increase in demand in the area, as greater Atlanta is now below the national average for months supply," said John Rainey, vice president of Re/Max Georgia.

Perhaps more ominously, double-digit price hikes that dramatically outpace gains in household incomes are often viewed as hints that a market is overheating or unsustainable “bubble” is forming. And the end to a bubble can be ugly in the extreme. The massive housing bubble that burst in 2006 and 2007 led to a nearly unprecedented financial crisis and a long, deep and painful recession.

(How long? On Thursday, the Georgia Labor Department reported that the state's unemployment rate had finally declined to the level of Dec. 2007 – the month that the recession began.)

The report, which covers 11 counties, show the total number of sales during the month was up 3.1 percent from March of last year.

Gwinnett led the region with the most home sales during the month. DeKalb had the largest proportional increase.

The two months tied for the largest increase in median sales price.

But Fulton, as usual, had the highest median price for homes sold (thanks, Buckhead!).


Home sales, core counties of metro Atlanta

March sales, change from last year

Gwinnett    1012              1%

Cobb               861            10%

Fulton            925               4%

DeKalb          770               12%

Clayton         120                6%

Median price, change from last year

Gwinnett    $233,000               15%

Cobb            $265,000                 7%

Fulton          $346,000                 7%

DeKalb        $265,000                 15%

Clayton       $137,600                   0%

Source: RE/MAX of Georgia