Metro Atlanta’s average home sale price has dropped about $55,000 in three years to $161,996, pulled down in part because as many as one in four recent sales are foreclosures, auctions or bank sales.
Values have fallen so far that many potential sellers have pulled homes off the market. Fewer than 38,000 homes were for sale in the 28-county area in July, the lowest total in nearly seven years. Distress sales will likely continue to make up a big part of the inventory for some time to come.
If monthly averages hold in November and December, nearly 110,000 metro homeowners will have received foreclosure notices in 2011, and most of those homes have not yet hit the market.
Those are some of the broader trends derived from key numbers that real-estate tracking firms spit out weekly, monthly and quarterly — along with construction permits issued, new homes started, numbers of foreclosures, existing homes sold and mortgages applied for. These metrics give consumers a brief snapshot of the market but leave them scanning the horizon for some larger sign of improvement or stability.
The Atlanta-Journal Constitution read multiple forecasts and studies from banks and industry groups, talked to local and national experts and metro home owners to sort through the deluge of information and gain insights into where the region is and what its future is.
Though Barclays Capital’s recent U.S. home market study cited metro Atlanta as one of the best bets for future housing growth, it also said the region must work through a market flooded with foreclosures and achieve a larger economic rebound for housing to recover.
Jim Grissett, an Emory University real estate professor and founding member of real estate investment company, The Parthenon Group, put it simply.
“The answer to all of this is jobs,” he said.
The correlation of the unemployment rate and foreclosures supports that idea.
RealtyTrac, a real-estate numbers crunching firm, estimates that every 6 to 10 job losses leads to one foreclosure.
The jobless rate in metro Atlanta was 5.3 percent in 2005, when 37,605 foreclosure notices were mailed out.
The rate was 9.7 percent in 2009 and 10.2 percent in 2010, and is 10.1 percent through September — and this will be the third year in a row that foreclosure notices will exceed 110,000.
Grissett said a number of moving economic pieces need to settle before a housing comeback begins in earnest. Election year politics create instability that will give people pause before making personal or business investments. The banking and lending debacle is still being sorted out, hampering the flow of loans. The foreclosure crisis has created a new class of credit-crippled renters who no longer can buy, he said, and some don’t want to tie themselves down to a mortgage and limit their chance to chase jobs.
Do not look for a quick comeback, he and others agreed.
A big part of the problem in metro Atlanta is that the major types of home-shoppers — first-timers, move-ups and people moving to chase jobs or better school districts — are on the sidelines. First-timers can find it tough to get loans, while the rest are hobbled by having to sell the home they’re now in.
Jimmy Prance of Hoschton is an example.
Prance runs Prance Outdoor advertising from home, but his wife’s job was transferred to Hall County, where they want to move. They have had their $450,000 house on the market 18 months, but he has not received a single offer despite cutting the price to $320,000, and offering $5,000 cash and other incentives.
“We have had two or three houses picked out, and then our house doesn’t sell, then the house we want sells. So we pick another one and wait,” Prance said.
He has changed Realtors several times and now is listed with discount broker Duffy Realty of Atlanta.
“One of our Realtors said, ‘You have lowered your price and you have incentives for the Realtor and the buyer and you have a gorgeous house. I don’t know of anything else you can do. You are kind of at the mercy of the market right now,’ ” Prance said.
First-time buyers, who have typically have made up 40 percent of sales, are hurt by a loss of earning power and saddled with student debt, which sucks up ever larger percentages of income.
The Census says median household income for those 25 to 34 years old declined 6.7 percent, slightly more than the national average. At the same time, student debt is up. Nationwide, recent graduates carried a record average debt load of $25,250.
More than 1 million recent graduates moved in with parents since the recession started, taking them out of the pool of shoppers.
It took the lure of a short sale that made buying the same price as renting to move Maegan Mellick, 27, and her husband into the first-time buyer category.
“We were those young people who weren’t interested in buying a home. We were more interested in paying off a lot of student debt and we love to travel,” she said.
Then her husband happened across a short sale — when a mortgage holder agrees to sell for less than the value of the home’s current loan value — on a place in Inman Park, where they had thought they couldn’t afford to buy. They are working their way through the lengthy and paper-heavy short-sale purchase process.
Low prices nearly kept Jeff Kassen, 38, of Atlanta, from selling their Brookhaven home and moving his growing family from intown to a better school district in Johns Creek.
They decided to take the risk of selling at a loss while hoping to make up the difference by also buying at the bottom of the cycle. They have accepted a low offer on their home and made a similar offer on the home they want to buy and hope to close Dec. 1 on both.
Kassen is optimistic about the long-term future of Atlanta housing.
“If you fast forward three, four or five years from now, I think people will be thinking, Why didn’t I buy?” Kassen said.
RealtyTrac, in a recent report, said foreclosure filings exceeded the number of houses sold until the middle of this year. That means the market is flooded with distressed houses. Over 60 percent of buyers are looking only for foreclosures, keeping prices low. There is a huge “shadow inventory” — homes in some stage of foreclosure but not yet on the market that will continue to saturate the market.
The report predicts a “long, slow, largely flat recovery” over three to four years.
Dan Forsman, the CEO of Prudential Georgia Realty, said single family home sales, projected to be about 60,000 this year, should rise to 75,000 next year. Sales in 2006 were near 130,000. But, he added,“ Until you get houses out of these foreclosure mills, you are not going to get better prices.”
The moderate good news is that, with so few new houses going up, existing home inventory eventually will shrink. A marker to look for: builders again putting up at least 1,000 new houses a month across metro Atlanta.
Among those watching the market and crunching the numbers, estimates for when the beginnings of slow recovery will emerge range from late next year to as long as five years from now.
“If you are betting money, there is no reason to bet that this thing is going to sort itself out anytime soon,” Grissett said.
Troubling trend lines
Local and national experts say the metro area housing will rebound, it just might take a few years. Meantime, home sellers struggle to move property with diminishing value and heavy competition from foreclosures. High unemployment has taken many potential buyers out of the market.
Units sold and dropping home sale prices
Foreclosure activity and unemployment rate
