With fewer buyers bidding, there’s less pressure upward on prices, especially among more expensive homes.
That doesn’t mean homes in metro Atlanta are all that affordable. The median sales price in July was still more than 17% higher than the same month a year earlier. But a few months ago, that comparison was running above 20%, according to Re/Max.
July’s moderation comes as the Federal Reserve has hiked interest rates to temper inflation, which has triggered forecasts for softness in housing markets in Atlanta and across the U.S. But Atlanta housing experts said there are multiple factors at play in July’s report.
‘They have not adapted’
After several years of rapid and robust price increases, many Atlanta area homeowners were too ambitious when they listed their property, setting the price too high. Some of those higher-priced homes are not selling, Jones said.
“Homes that are priced correctly continue to sell fast,” she said. “However, many sellers are overpricing right now — they have not adapted to the shift.”
Some of the decline in the median price is explained by the mix of homes sold. If there are proportionally more lower-priced homes sold, the median declines.
Recent data bolster that conclusion, according to Zillow, which tracks home listings and sales and divides the market into three price tiers.
Sales among the highest third in metro Atlanta are down 19.5% from a year ago. In the lowest third, sales are down 2.4%, according to Zillow.
“The most competition right now is for the least-expensive homes, said Nicole Bachaud, senior economist at Zillow. “Homes are staying on the market longer. Buyers are waiting in the wings to resume their search, if and when prices relax a bit.”
Inventory low but growing
Many experts have been predicting a retreat in housing since the Federal Reserve started lifting short-term interest rates late last year. That campaign, aimed at taming inflation, helped push mortgage rates higher, which in turn, made borrowing more expensive for homebuyers who don’t pay cash.
But the average 30-year mortgage rate peaked at 5.81% in late June and dipped in July, according to the Federal Home Loan Mortgage Corp., which backs millions of loans.
So the rate by itself doesn’t explain July’s market, said James Hamby, broker and owner of Southern Classic Realtors, which handles transactions across the state. Instead, the drop-off in sales among higher priced homes came because sellers had grown too accustomed to having the upper hand, he said.
The shift in balance between buyers and sellers has more impact than the rising in mortgages, Hamby said.
“I think right now, with a super strong sellers’ market, I think sellers are listing for more than their property is worth,” he said. “It’s supply and demand more than interest rates.”
For years — even before the pandemic — the expanding number of wannabe buyers has been outpacing growth in the pool of homes listed for sale. That imbalance has made for an auction-like atmosphere around many homes, which fueled price increases.
Inventory — that is, the number of homes listed for sale — is still at historically low levels, but it’s been rising. Last month, inventory was 20% higher than in June and 49% above a year earlier, Re/Max said.
The balance between potential buyers and sellers has changed, and that changes the way transactions happen and the eventual sales price, said Allison Kloster of Home Real Estate.
“I do feel like the frenzy is gone,” she said. “Now, if you see a house and there are two or three offers – well, that’s reasonable.”
Metro Atlanta’s fall in sales, while dramatic, was nowhere near the sharpest drop nationally. Sales in Houston, San Diego and Miami fell more than 40%, compared to a year ago.
Metro Atlanta housing market, July 2022
Homes sold: 8,225
Sales compared to year ago: down 26%
Median price of home sold: $395,000
Median price, compared to year ago: up 17.2%
Median price, compared to June: down 1.7%
Number of homes listed for sale, compared to June: up 20%
Number of homes listed for sale, compared to year ago: up 49%
Share of home listings whose price was reduced: 20.3%.
Mortgage payment on average new purchase: $2,184 a month
Change in mortgage payment since 2019: up 85.2%
Sources: Re/Max, Zillow, Federal Home Loan Mortgage Bank