The expected seasonal surge in spring home sales was cut to a sluggish flow last month as interest rates and economic worry continued to act as obstructions.
Fewer than 5,000 homes were sold during April in metro Atlanta, down 11% from March and a nearly 25% drop from the number of sales during the same month last year, according to Georgia Multiple Listing Service.
“Interest rates are still a factor for both prospective buyers and sellers,” said John Ryan, chief marketing officer for Georgia MLS.
Signs are growing, however, that this month could be the turnaround.
Interest rates started climbing in late 2021 as the Federal Reserve lifted its benchmark for short-term borrowing in an effort to tame inflation by slowing the economy. While mortgage rates are not yoked to those rates, they do tend to follow their trajectory.
Mortgage rates more than doubled, hitting an average above 7% in November.
Higher rates pushed some prospective buyers out of the market because they dramatically increased borrowing costs. But higher rates also kept many prospective sellers from putting their homes on the market, in metro Atlanta and around the country, Ryan said.
Most U.S. homeowners had either purchased homes or refinanced their mortgages when rates were low. Mortgage rates had fallen after the burst of the massive housing bubble in about 2006 and for years remained far below pre-recession levels. They dipped even more in 2019, falling to historic lows during the pandemic.
That means that in the past 17 years, most homeowners either bought homes or refinanced mortgages at very low rates.
Which put them in a bind, Ryan said. “The doubling of interest rates over the past year has caused prospective sellers to be on the fence about putting their homes on the market, due to taking on a higher interest rate for their next purchase.”
Inventory — that is, the number of homes listed for sale — was low in late 2021, even before the rates started climbing. With higher rates, listings plummeted.
New home construction has become an ever-larger part of the market, but builders cannot put houses up fast enough to satisfy demand, said John Hunt, principal of Market Nsight, which tracks housing markets through the Southeast.
“They’re snapped up as soon as they’re out of the ground,” he said.
But after cresting above 7% in November, rates dipped and stabilized. Mortgages rates now average about 6.39%, according to the Federal Home Loan Mortgage Corp., commonly known as Freddie Mac, which buys mortgages on secondary markets.
That could persuade some sellers to list their homes, reinforcing what is usually a late spring rush, Ryan said. “As the school year winds down, consumers tend to consider the beginning of May as the time to put their property on the market.”
What happens with listings in May will be a sign of how summer selling will go, he said.
Signs of a rebound are in early data that show a dramatic jump in Re/Max “pending sales” — that is, homes where there is a preliminary deal between seller and buyer — said Kristen Jones, broker and owner of Re/Max Around Atlanta.
“So it looks like we will have a strong second quarter,” she said. “Hope that trend continues for the remainder of 2023.”
But even with increased listings, the balance between buyers and sellers remains badly out of whack. The number of listings is roughly half pre-recession levels. With so many younger professionals looking to buy homes, desirable homes are still being sold quickly, which pushes prices upward.
The median price of a metro Atlanta home sold last month was $390,000, according to MLS, up 3.4% from the previous month.
The average number of days a home is on market — that is, before being sold or pulled from the listings for other reasons — has fallen to 11 from 29 in January, Jones said. “There is still so much pent-up demand that homes are not sitting on the market.”
Metro Atlanta housing market
Homes sold: 4,945
Median sales price: $390,000
Active listings: 9,364
Compared to March
Homes sold: -11.4%
Median sales price: +3.4%
Active listings: -1.3%
Compared to last year
Homes sold: -24.8%
Median sales price: -1.3%
Active listings: +47.3%
Average mortgage rates
Pre-pandemic high: 18.63% (Oct. 1981)
Pandemic low: 2.65% (Jan. 2021)
High last year: 7.08%
Low this year: 6.12%
Source: Georgia Multiple Listing Service, Federal Home Loan Mortgage Corp.
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