With mortgage rates edging up again, the metro Atlanta housing market took an early summer stumble in June, according to a report from the Georgia Multiple Listing Service.
The number of homes sold in the 12-county core centering on the city fell 6.4% from May, a 23.4% plunge from the number of sales during the same month last year, said John Ryan, chief marketing officer for the Georgia MLS.
“Homebuyers are very sensitive to interest rates right now,” he said. “I think a lot of people are on the fence.”
During the month, 5,456 homes were sold with the median price of a sale ticking up slightly from May to $408,783.
The fall from last year isn’t remarkable, given the pandemic-spurred fluctuations in the market, but the difference from month to month is significant, said Kristen Jones, broker and owner at Re/Max Around Atlanta. “Most years, June sales are typically pretty flat compared to May sales.”
But, she said, the linchpin in the market is inventory — that is, the number of homes for sale.
In a generally balanced market, where buyers and sellers have roughly equal negotiating power, inventory amounts to six months of sales or more. Inventory in metro Atlanta rose to 10,248 last month — up 9.3% from May, but is still less than two months of sales.
The smaller the inventory, the fewer choices wannabe buyers have and the more they end up bidding against each other, an imbalance giving sellers the upper hand.
Higher mortgage rates can also tilt the balance between supply and demand, usually chilling demand by making loans more costly, which shrinks a buyer’s purchasing power. And some first-time homebuyers have either stopped looking or downsized their search to less expensive homes.
“The median price is up from $330,000 in the past two years and it’s pretty high for someone new in the market,” said Latoya Lyonel Forbes, a broker at Village Premier Collection. “And mortgage rates have gone up so much. I have some buyers who are qualified and ready to go and they have just put it on hold.”
The rise in rates has also been holding down the supply of homes for sale.
The lion’s share of homeowners currently have mortgages at much lower rates, and few are anxious to trade them in for something higher in a new home. So many owners who might sell have been sitting tight.
A year ago, the average mortgage rate was just rising above 5% for the first time since early 2010.
This June, the average rate for a 30-year mortgage was above 6.6% for the entire month. It recently edged up to 6.82%, according to Freddie Mac, the national mortgage backer. More than 80% of homeowners interested in buying a new home said they felt “locked in” by their existing low-rate mortgage, according to Realtor.com.
But even when mortgage rates were in double-digits — cresting above 18% in the early 1980s — the housing market did not completely freeze. Some bought homes with the idea of re-financing when rates dropped — which they eventually did, slipping below 10% in 1990.
The next few weeks could signal how consumers are handling the situation, said Ryan of MLS. “Historically, things usually decline in August. So this is an important moment.”
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