Metro Atlanta home prices continued to rise late into the spring, although the pace was slower than usual and the number of homes for sale remained lower than normal.
Average prices in May rose 1.4 percent from April and 5.1 percent from the same month a year ago, putting Atlanta solidly in the middle of the pack among U.S. metro areas, according to the S&P/Case-Shiller Home Price Index.
It’s the latest in a string of reports showing that the Atlanta region’s housing market improvement remains uneven and – in some ways – puzzling.
But the engines of growth have been gearing up, said Adam Coker, market investment executive for U.S. Trust in Atlanta. “What is driving the market, more than anything, is the strengthening labor market. The unemployment rate has kept coming down.”
More than 77,000 jobs were added during the past year, while the metro’s jobless rate, which had crested at 10.6 percent, was down last month to 6 percent. “We expect that to be near 4 percent in 2016,” Coker said.
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Luis Gaud, 27, took the leap this spring, buying his first home, a one-bedroom condo not far from the Beltline and Little Five Points in the Poncey Highland area of the city of Atlanta. The customs officer said he wanted to act while he could afford what he wanted and buy something he’d be able to sell in a few years.
“I figured it was time to buy,” he said. “And the way things are going, I think the value will go up.”
Among the 20 largest metro areas, prices were up 4.7 percent over the past year, according to Case-Shiller. The pace has cooled in many markets, however. A year ago, Atlanta prices had been jumping at a double-digit pace.
Case-Shiller uses an index, not a dollar figure. Other reports that give average prices show similar trends. For instance, Black Knight, a research firm, puts Atlanta’s average price at $190,000 up 5.9 percent from a year ago.
One factor that has puzzled many experts is “inventory,” the supply of homes for sales.
Currently the supply-demand balance is out of whack, said Jessica Houghton, a realtor with Coldwell Banker. “Inventory is really low and the buyers are still out there.”
In a healthy market, inventory typically amounts to about six or seven months of sales. After a year of experts predicting an imminent flow of new listings, that supply is about three months – or even lower in many areas.
In hot areas buyers compete for relatively few homes – particularly in the lower price ranges: roughly 80 percent of the purchasers in metro Atlanta are buying homes priced below $300,000, according to John Hunt, president of ViaSearch, an Atlanta-based market research company.
“In some places, houses are selling even before the for-sale signs are up,” said K.C. Conway, senior vice president at SunTrust Commercial Real Estate.
Why is inventory so low? Experts suggest a range of possibilities.
Some cite the economic struggles of millennials stuck with student debt and slow-starting careers.
It could also be that the market’s improvement has been slow to dawn on homeowners, said Conway. “This is the first spring that existing homeowners are realizing that, ‘Hey, I could sell my house.’ It is a kind of psychological market adjustment.”
Large homebuilders, meanwhile, have been cautious, and most small ones are out of the business.
Another factor could be psychology. Some homeowners still feel burned by the nosedive in values they experienced during the bust. Some are still recovering from foreclosures or are “underwater” on their mortgages, owing more than their homes are worth. Even as the market improves, prices for many homeowners haven’t climbed enough to make selling attractive.
People hesitate to sell because of how many other people are hesitating, said Teresa Palacios Smith, vice president of Berkshire Hathaway HomeServices and president of the National Association of Hispanic Real Estate Professionals. “Some people are nervous – if they put their house on the market, will they be able to find something to buy?”
And for those on the fence about selling, the season may have passed, she said. “Unless they have to do something, they may just wait for spring.”
According to Case-Shiller, metro Atlanta had the 10th-fastest price growth during the past year among the top 20 metro areas. Denver had the most rapid price growth over the year, at 10 percent. Washington, D.C. was slowest, edging up just 1.3 percent.
Metro Atlanta prices are still roughly 10 percent below their peak in 2007, according to the index.