With spring in the air, the housing market has continued to track the path of mortgage rates like the pollen follows climbing temperatures.
The average mortgage rate hit a four-month low in early February, wannabe buyers flowed back into the search for homes, and the number of sales in metro Atlanta’s core counties jumped more than 30% from the month before, according to a report from the Georgia Multiple Listing Service.
In those dozen counties centered on the city, the median home price rose to $371,843 as the renewed interest in buying ran into a shortage of homes for sale, said John Ryan, chief marketing officer of Georgia MLS. “Lack of inventory is still the primary factor for the increase in median price.”
Typically the number of both buyers and sellers rises in the spring, which is considered the peak for the housing market as families scramble to find new homes before the start of the next school year.
But it would take a flood of new homes for the market to reach a balance where buyers and sellers have roughly equal bargaining power.
Before the pandemic, inventory — that is, the number of homes listed for sale — represented about three months of purchases. The market fell below that and has not returned to balance, said Kristen Jones, owner of Re/Max Around Atlanta. “We are still seeing less than two months supply of active inventory where four to six months is considered a balanced market.”
There are simply not enough homes to match the number of people looking, especially in metro Atlanta, which has been drawing new residents as its economy has grown. While much cheaper than high-cost northern and western metros, rising prices have made Atlanta relatively less affordable compared to some other southeastern cities.
The region ranks 27th nationally, compared to Dallas at 9th, Jacksonville at 5th, Charlotte at 12th and Birmingham at 18th, according to a study by Bankrate.
More homes would improve affordability, but the region has a shortage of about 63,000 homes, according to John Hunt, principal at MarketNsight, which tracks housing markets in the Southeast.
The shortfall is largely because homebuilding has never made up the ground lost during and after the recession. But current homeowners have also been reluctant to sell since the vast majority have mortgages pay rates far below what they would face if they sold and bought another home.
And like other potential buyers, they also face a market with too few homes for sale.
The decline in mortgage rates prompted more buyers to look, but the number of listings did not rise.
While not directly set by short-term interest rates, mortgage rates generally climbed as the Federal Reserve raised borrowing costs for big banks in its attempt to slow investment, dampen growth and choke off inflation.
The average mortgage rate climbed from below 3% in late 2021 to a peak above 7% last fall, sending a chill through the housing market. Home sales plummeted, slamming the brakes on what had been a rapid rise in prices.
In early February, with the average mortgage rate down to about 6%, homebuyers showed how sensitive they are to modest changes, said Jones from Re/Max. “We have seen an upward trend in pending sales since November.”
Atlanta brokers have been predicting a strong spring, but that expectation is threatened by the Fed’s apparent determination to keep raising short-term rates. Mortgage rates climbed in late February and the impact on the market was immediate, said MarketNsight’s Hunt.
“It hit 6.5% in the third week of February and we saw that it had a negative impact on demand,” he said.
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