Metro Atlanta home sales are much stronger than just a few years ago, new homes are rising again and average prices are edging toward the peaks of 2007, just before the bubble burst.
Those numbers would seem to mean something different this time. Almost certainly not another bubble — but not full health, either.
“Now do we measure recovery by getting back to the ‘bubble’ highs?” asked Jim Hansberger, managing director, Hansberger & Merlin at Morgan Stanley Wealth Management in Atlanta. “I don’t know how you answer that … There are so many other factors.”
Average Atlanta prices have racked up a 53 percent gain since the recovery gained traction in 2012. That leaves them about 8 percent below their highs.
But economists and real estate pros are wary of declaring the patient healed — or even of saying which metrics would prove that at this point.
“I don’t know that there are any perfect measurements to answer that question,” Hansberger said.
The measurements remain very mixed. Prices may be up, for instance, but one reason is that the supply of homes for sale remains historically low. Reasons vary, ranging from reduced job mobility to a simple shift in psychology that no longer favors move-ups for their own sake.
Another factor: Even now, about 20 percent the mortgages in metro Atlanta are underwater, according to Zillow, the Seattle-based real estate research company. Among the nation’s largest metros, that is one of the highest rates, according to Zillow.
It’s actually worse than that: Twice as many – 40.4 percent of homeowners with a mortgage are “effectively underwater,” Zillow says, with so little equity that selling their homes would not leave them enough money to pay for the transaction and finding another home.
Lower-priced homes are the most likely to be underwater, Zillow says, with 43 percent of homes in the bottom third of prices falling into the category.
Location, location …
Moreover, in some neighborhoods, the crisis has never passed, said Dan Immergluck, professor in Georgia Tech’s School of City and Regional Planning and author of the recently published book “Preventing The next Mortgage Crisis.”
“The effect of the crisis has been uneven,” he said. “There are neighborhoods, especially on the south side of the city, that still have forty and fifty percent vacancy rates. For example, the Pittsburgh area.”
In 23 ZIP codes around metro Atlanta, more than 40 percent of mortgages are underwater. In five of them, more than half the mortgages are underwater.
The worst damage is in Riverdale 30296, where nearly six of every 10 homeowners with mortgages have negative equity.
Despite the happy-looking average prices, more than 20 percent of Atlanta homes have lost value over the past year, according to Svenja Gudell, Zillow’s chief economist.
Negative equity is another factor that effectively blocks homeowners from selling. Most won’t – or can’t — sell if the price won’t pay off their mortgage. That is seen as one reason for-sale listings have been lean for so long.
A weaker-than-expected flow of first-time buyers – a critical part of any healthy and growing market — also afflicts the market.
Some blame that on millennials still living in parents’ basements and working at a coffee shop, but underlying economic trends come into play. A modestly expanding labor market tilted toward tech and healthcare skills has delayed many young adults’ transition into life phases such as becoming homeowners.
Student loan debt hasn’t helped, according to a recent survey by NeighborWorks America, a Washington, D.C. organization that trains people for work in community development and housing.
Debt an obstacle
The survey found 57 percent of respondents with debt said it was either “very much” or “somewhat” of an obstacle, compared to 49 percent last year.
The key driver to growth in homebuying is the formation of new households – traditionally, although not exclusively, by marriage. But young people are waiting ever-longer to married.
According to government data, the median age for a marriage has increased this century from 26.8 to 29.3 for men and from 25.1 to 27.0 for women.
The combination of factors has led to proportionally more young people renting and anemic demand, said Charlotte Sears, president of Coldwell Banker Residential Brokerage in Atlanta.
“We are not seeing the millennials in the number that we had expected,” Sears said. “We are looking forward to having first-time homebuyers step back into the market.”
Shenelle Francis, a Realtor with Keller Williams Realty, said a bright spot is young professional couples, who she said are looking for homes in or near the city and can often put down 20 percent of the purchases price.
Even as summer’s buying season ended, their ranks did not thin much, Francis said, adding: “I think it is going to be a great year.”
Growth ingredients
Indeed, Hansberger of Morgan Stanley said the ingredients are there for solid growth: They include an increase in formation of households; somewhat higher wages, at least in some jobs; historically low unemployment claims; and lower gas prices than most of the past of the past decade.
Yet the biggest question marks are, at its base, not really economic, he said.
“All these things auger for a better year. But we don’t know yet what kind of effect there will be form the shifts in demography and the culture.”
The largest group in the workforce now are the millennials, even as the previously dominant boomers are retiring by the tens of thousands. But will older people sell their homes? Will millennials shift from renting to owning?
Other “known unknowns,” to borrow a foreign policy phrase, also will affect housing’s direction from here. They include the effect of gay marriage and the outcome of political tussles over immigration policy.
So despite the upbeat economics, it’s a sign of hubris to be too sure about a rosey outlook for the next year.
“Anyone who knows what is going on knows that we are in some sort of demographic and cultural shift,” Hansberger said.
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