The Atlanta real estate market has seen a lot of highs and lows over the last several years, including the precipitous rise and fall in prices that so severely impacted our region. Lately, however, statistics show that prices are coming back, slowly but steadily climbing. Also in the mix is another “low,” one that spells good news for sellers — but greater competition for buyers and that is the supply of houses, or inventory.
Just one year ago, the supply of properties in the $250,000 and under range (among the largest volume sold) stood at six to seven months (meaning that if no houses were added to current inventory going forward, it would take only six to seven months to deplete the existing reserve). Today, there is barely a four-month supply. For homes in the higher brackets, the supply level increases slightly, but is down to five to seven months today versus 11 months only a year ago. A primary reason is rising prices. Many homeowners are holding on to their homes because they see prices steadily increasing; others who may be underwater see the same thing and are holding on in the hope of averting a short sale.
What does this mean to buyers and sellers? Essentially, it bodes well for sellers, particularly those with homes in good condition, in good neighborhoods with good schools. The key, though, is pricing. We are hearing many reports from the field that houses that fit the above description, and are priced right from the start (based on comparables,) are getting multiple offers and sometimes even triggering bidding competitions, something the Atlanta real estate market has not seen since the height of the housing bubble. Additionally, the sale price to list price ratio has increased. One year ago, the difference stood at 95 percent of list price, today it has increased to slightly more than 97 percent.
For buyers, this means they must act quickly. Prices are still lower than what they were in 2007, and interest rates remain at historic lows. Houses that are well priced from the start are selling quickly. Finding and setting the “right price” is easier when you work with a Realtor. A Realtor can compile sale prices on homes, which are similar in size, quality, features and amenities to your own, and which are sold within the last six months in your neighborhood or surrounding areas.
But this brings another challenge for both buyers and sellers – will the home appraise for the new, higher sales price? Appraisers are frequently struggling these days to find comparables that support the new prices and when they can’t find relevant ones, they can’t appraise the homes at the new market value. This issue is further exacerbated when bidding wars occur. Sometimes it means that the buyer and seller must negotiate a new price, and if the seller won’t come down, the buyer must come to the closing table with the difference.
Another factor driving prices upward is the presence of more buyers in the market. Basic economic forces determine that increasing prices result from historically low inventories coupled with increasing demand. According to the National Association of Realtors, there is also a national trend building for increased household formations (renters entering the home buying market, young adults moving out into their first homes, etc.). There is also a general sense that, even though consumer confidence waxes and wanes with the news, it is increasing as far as homeownership is concerned.
The bottom line is that prices are still low and interest rates are at historic levels. If you are sitting on the fence about buying or selling, this is the time to act. And when you do, be sure to engage a local Realtor – there is a real difference.
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