Atlanta housing sales sluggish in late spring, held back by high mortgage rates

May is usually one of the year’s strongest but last month’s numbers were lackluster for buyers and sellers.
After two years of rising mortgage rates, the metro Atlanta housing market is struggling for traction. An aggressive campaign of interest-rate increases from the Federal Reserve has pushed mortgage rates to around 7%. (Feverpitched/Dreamstime/TNS)

Credit: TNS

Credit: TNS

After two years of rising mortgage rates, the metro Atlanta housing market is struggling for traction. An aggressive campaign of interest-rate increases from the Federal Reserve has pushed mortgage rates to around 7%. (Feverpitched/Dreamstime/TNS)

With high mortgage rates still squeezing both buyers and sellers, the metro Atlanta housing market posted lackluster numbers in May, a month that is historically one of the year’s strongest, according to the Georgia Multiple Listing Services.

Sales were up from April, as they usually are, but slightly fewer homes were sold than in the same month of 2023, said John Ryan, chief marketing officer for Georgia MLS.

“There’s a feeling of a shift,” he said. “I have to feel that interest rates are the dampener.”

Many buyers of modest means are discouraged, not just by higher home prices, but by borrowing rates that make each month’s payment more costly. And many sellers would buy after they sell, so they care about those rates, too.

The result is a market still tilted to sellers’ advantage, but the slope is not steep.

Homes now are on the market longer and sellers are more willing to bargain, Ryan said: Of roughly 6,850 sales in May, sellers cut their list price in 5,600 price reductions, compared to 3,100 a year ago.

Gone are the double-digit increases in home values of earlier in the pandemic.

The median price of a home sold was $400,000 in the 29 counties centered on the city of Atlanta, up 3.9% from a year earlier, according to the MLS. That compares with the climb of 26% between May 2020 and May 2021, and the 23% rise in the following year.

Still, as the cliché says, it’s about location. The overall numbers mask the differences from place to place and from price to price.

Lauren Kruse, a realtor with Bolst Real Estate in Atlanta, represented a bidder for a house in the Morningside neighborhood of Atlanta. Her client eventually purchased the house for more than $2 million. She had to beat out seven other offers.

“That was very competitive,” Kruse said. She also represents sellers of homes listed at about one-fifth of that house in Morningside. “And I have some listings in Dallas, Georgia, that are just sitting.”

Morningside aside, the lower, more affordable homes are the heart of the market. However, “starter homes” of a decade ago were selling for $200,000. Most of the homes sold last month were price between $250,000 and $500,000, with the lion’s share of those between $300,000 and $400,000

“It’s been real difficult for first-time homebuyers,” Kruse said. “And if you are buying something that’s $300,000 to $400,000 these days, the house may be older than average, you might have a 15-year-old HVAC system, a 12-year-old roof,” she said. “You may need to put in some sweat equity.”

Mortgage rates started climbing in 2022 after the Federal Reserve began its anti-inflation campaign by lifting its benchmark borrowing rate, a change that rippled through the financial system. Mortgage rates crested at nearly 8% last October before sliding to 6.6% in December.

But they edged up again this spring and were above or just below 7% for much of May.

Historically, that’s not high — they were continually higher from 1971 to 2001. And from 1978 to 1990, a 30-year mortgage was usually 10% or more. But nearly 60% of current homeowners bought when rates were less than 4%, according to national brokerage Redfin, and many other owners refinanced to the low rates.

That meant that many owners who wanted to sell were “locked in,” unwilling to swap a low mortgage for a much higher one — especially with home prices so much higher. And that reluctance has helped keep inventories — that is, the number of homes listed for sale — at near-record lows for more than a year.

Now, even though people don’t like the higher rates, many sellers are shrugging and listing their homes, raising the number of homes listed for sale in May was 60% higher than a year ago. But there’s a lot of ground to make up, so inventory is still far shy of pre-pandemic levels.

The tussle of supply and demand eventually will lead to more construction, more homes for sale and a balanced market in which buyers have more choices and prices are stable — but it’s a long process, said Derrick Barker, chief executive of Atlanta-based Nectar, which loans investors money to buy residential real estate.

Potential sellers may be forced to move by life cycle events — divorce, retirement, illness — but generally not by the need to pay off the house loan, he said. “It can take a long time because the single-family home market is dominated by 30-year mortgages.”

The up-and-down cycle has happened repeatedly, Barker said. “You’ve seen it over and over again. We are not near the middle, we are near the beginning of the process.”

Yet in America, the demand for home ownership is relentless, even when the barriers are high, said Glen Bernier, Atlanta-based vice president of consumer lending at Bank of America.

Many wannabe buyers are young professionals with decent and rising incomes, but that is not always enough to purchase a home, he said. “The biggest hurdle for homebuyers now is the downpayment. Scraping up the money is hard.”

With Atlanta rents on average no longer rising, many potential buyers have postponed a purchase, if not given up on the idea. With applications for mortgages so low, Bank of America is offering grants of up to $10,000 to help with a downpayment and $7,500 to soften the impact of mortgage rates, Bernier said.

“This is about the slowest that the market has been,” he said. “It is definitely the most challenging market that I’ve seen.”

Atlanta housing market snapshot* for May

Homes sold: 6,862

Median price: $412,000

Listed for sale: 19,066

Atlanta housing, May compared to a year earlier

Homes sold: -5.3%

Median price: +3.9%

Listed for sale: +59.7%

Average 30-year fixed rate mortgage, good credit

Recent: 6.99% (June 6)

Past year high: 7.79% (October 2023)

Past year low: 6.61% (January 2024)

Five-year low: 2.65% (January 2021)

All-time high: 18.53% (October 1981)

*Numbers will be revised as more data is collected

Sources: Georgia Multiple Listing Services, Freddie Mac, Federal Reserve Bank of St. Louis