In a dramatic reversal of the depressing trend we felt for years in our hometown market, metro Atlanta home prices jumped 19.2 percent in the first quarter of this year, compared to prices during the same period a year ago. This good news comes to us from the economists at Corelogic Case-Shiller.
And it’s not just us. As it turns out, some of the cities that were hardest hit during the Great Recession saw the largest increases, including Phoenix (22 percent), Las Vegas (20 percent), Sacramento (21 percent) and Miami (14 percent).
Now I’m guessing you are thinking what I thought when I saw these numbers: They are so high they might mean we are headed into another housing bubble. Well, Dr. David Stiff, chief economist for CoreLogic, was worried about the same thing, until he looked closely at the numbers.
He addressed the concern about a new bubble in the statement that accompanied the report, and you can download both from my website.
"Although double-digit gains usually indicate unsustainable appreciation and, possibly, bubbles in some metro areas, there is less need for concern now since home prices remain 26 percent below their peak nationally and are even lower in many metro markets," said Dr. Stiff.
The report cites several factors for the surge in prices:
* continued availability of extremely low interest rates for home buyers.
Even though rates have recently climbed into the 4 percent range, these rates are historically very low. Remember it was not too long ago when we were all paying 9 percent and 10 percent for fixed-rate home loans.
* a dramatic reduction in the inventory of homes for sale, nationally and in the metro Atlanta area.
As recently as two years ago, we had a 20-month inventory of unsold homes in the metro Atlanta market. That inventory, according to a local multiple listing service, is now down to just three months.
Economists cite a six-month inventory as an equilibrium between buyers and sellers, in which the market favors neither. If that is correct, our current inventory makes this a solid sellers market.
Stiff predicts that home prices in Atlanta will moderate to an increase of about 5 percent between first quarter 2013 and first quarter 2014.
I had the opportunity recently to address the monthly meeting of the Metro Atlanta Home Builders Association. Trust me, confidence in the builder community is soaring, and construction activity is increasing accordingly.
Look for metro Atlanta home prices to continue their upward climb even as we head into the fall and winter months. That climb will be moderated by slightly higher interest rates coupled with an increase in inventory from previously underwater sellers finally able to put their homes on the market at a profit.
If you'd like to download a free copy of the complete CoreLogic report and the accompanying news release, you may do so at money99.com.
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