WHY IT MATTERS
Home values are important even to people who aren’t likely to sell or buy any time soon. They contribute to the so-called “wealth effect” that helps drive the broader economy by making people more confident about purchases of all types.
Metro Atlanta home prices rose more than 20 percent in May — the sixth straight month of double digit advances — with low inventory, fewer foreclosures and investor purchases fueling the increase.
Sales prices in the metro area rose 20.1 percent from a year earlier, and 3.4 percent from April, according to the monthly S&P Case-Shiller Home Price Index.
Despite rebounding values, many homeowners who might have considered selling in prior years are staying put for now. That, in turn, is boosting prices as buyers have fewer houses to pick from — especially in desirable areas.
In May, metro Atlanta’s supply of homes for sale was just 3.6 months, according to Smart Numbers, an Atlanta firm that tracks housing data. Normally, the region is expected to have a six month supply of homes.
The price increases, echoed to varying degrees in all 20 cities in the Case-Shiller index, are not sustainable, said David Blitzer, managing director of S&P/Dow Jones Indices.
“I think there will be some further rebound,” Blitzer said. “The inventory problem is still with us. I don’t think it’s going to go away overnight.”
The rate at which prices are rising in metro Atlanta slipped slightly. The year-over-year increase was 20.8 percent in April. And they had risen 3.8 percent in April from March.
The string of monthly increases have brought metro Atlanta housing prices, which had fallen as low as 1996 levels last March, back to 2000 levels.
Nationally, the Case-Shiller index rose 12.2 percent year-over-year and 2.4 percent in May, from April.
As more people become confident with rising prices, inventory levels have started to improve, said Will Fassinger, an agent with Redfin. He said when more people were underwater, last winter, they were less likely to want to sell. In May, he said, there was a buying and selling frenzy.
Demand depends on the neighborhood, however. Tina Fountain, president of Tina Fountain Realtors, said some pockets of the region are selling quickly. In others, it is still slow.
“It’s called supply and demand, that’s it,” said Mary Lou Lanaux, a Realtor with Harry Norman.
People buying their second home — a group that normally makes up 30 percent of the market — now makes up 20 percent of the market, indicating that in some areas, people are watching prices rise and deciding to stay put, said John Hunt with Smart Numbers. While more are beginning to consider selling, their reluctance contributes to tight inventory.
Some painted walls, updated bathrooms or installed new kitchens through the recession. Now, they’re deciding to live with their investment instead of buying elsewhere.
Erika Brookes, a Druid Hills resident who is renovating the kitchen and family room of her 1920s house and adding a master bedroom and bath, said she thought about moving, but there were more reasons not to.
She and her husband like their neighborhood and have an easy commute.
“We considered moving within the neighborhood, but we did a comparison of what was on the market at the time,” Brookes said. “By the time we considered the financial investment, it made more sense to renovate the home we’re in.”
Rising prices, she said, are “fantastic.”
For people who already own homes in hot areas, it often makes more financial sense to renovate than move, said Warner McConaughey, president and CEO of HammerSmith. His company is working on the Brookes’ home and said when people like their neighborhood, they’re now more likely to determine that there’s more value in an addition than in a whole new home.
Other remodelers also said people are choosing not to move. Randy Glazer, owner of Glazer designs, said he did almost 40 kitchens last year — normal is about 22. People are also building out basements to get some extra space, or adding a second story, he said. Many of his clients love their neighborhoods and can afford to fix their houses, but not to move.
Deborah Casey, who lives in Sandy Springs, decided years ago that she wasn’t going to move again. She recently finished renovating her kitchen, and much of the first floor.
“We had thought about it early on, that we might move,” she said. “Where we are suited our needs… You can’t buy that location.”
Cities with the largest monthly home price increases in May
Source: S&P/Case-Shiller Home Price Indices
