The real estate market in metro Atlanta has shifted dramatically in the past 18 months, bringing buyers and sellers an unprecedented opportunity.
The question is always asked: Is this a buyer’s market of a seller’s market? I believe the answer to both questions is “Yes!”
Yes, this is a buyer’s market because:
* There is an ample supply of reasonably priced homes. It’s true that home builders have been slow to gear up for the recovery, but that situation is remedying itself.
* Resale homes are still a bargain compared to their pre-recession levels. In many parts of town, homes can still be bought for substantially less than a buyer would have paid in 2008.
* Sellers in many areas are still willing to offer buyers help with closing costs and other expenses.
* Interest rates for long-term home loans are still at historically low levels.
I believe most borrowers overlook the fact that there is substantial value in the financing of their home. Consumers need to realize that two identical homes side-by-side can have very different values due to their underlying financing.
If we once again see double-digit interest rates for home loans, existing loans at 5.0 percent will be extremely desirable. And even though almost all loans now carry a “due-on-sale” provision, owners will always find a way to profit from such a rate differential, even if it means renting the home to others.
At the same time, yes, it’s a seller’s market, because:
* The number one problem for the past five years has been the sea of foreclosures that decimated property values.
Lenders found the remedy that had always worked for them in the past, non-judicial foreclosure, did not make them whole at the auction block as they expected. They found themselves instead in possession of thousands of vacant homes, many unsecured and most needing some repair.
The banks drowned in a problem of their own creation, refusing in most cases to modify a borrower’s loan in favor of the more familiar path to foreclosure, and they ended up with an asset rapidly declining in value, and poisoning the surrounding neighborhood.
Only in the past 18 months has the investor community geared up to buy and renovate these homes, which stabilized values and reversed a trend of declining prices. At least for now, we are beginning to see a return to normalcy in most areas, though there are still some pockets of unstable values.
* Overall, typical home sale prices have increased by more than 20 percent in the past 18 months.
While that rate of increase is not sustainable in the future, it has allowed many underwater owners enough breathing room to negotiate a sale. And it’s important to note that we have seen no retreat in prices since the recovery began.
* The most important factor in making this a seller’s market is the dramatic decline in the inventory of homes for sale. At one point several years ago, reports circulated that we had an inventory representing almost 24 months of consumption.
Analysts consider a 6-month inventory a state of equilibrium between buyers and sellers. The current inventory is now quoted at 3 months, a solid seller’s market.
It appears to me that both buyers and sellers are benefitting from the current state of our economy. And from this perspective, it actually seems to be getting better on a monthly basis.
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