Spring on the horizon, buyers and sellers dive into the housing market

February home prices rose to a median of nearly $400k, up 7.1 % over February last year
Noah Giles and his girlfriend, Jordan Lipinski, both age 25, make muffins together in the new townhouse they bought last fall near Hapeville. (Olivia Bowdoin for the AJC).

Credit: Olivia Bowdoin

Credit: Olivia Bowdoin

Noah Giles and his girlfriend, Jordan Lipinski, both age 25, make muffins together in the new townhouse they bought last fall near Hapeville. (Olivia Bowdoin for the AJC).

February’s post-holiday, pre-spring, metro Atlanta housing market saw both a burst of buying and a surge of sellers although the balance still tilted to the advantage of those looking to sell, which meant that prices kept rising, according to data from the Georgia Multiple Listing Services.

There were 3,916 homes sold in the 12-counties centered on Atlanta during the month, with a median price of $399,000 — up 7.1% from the same month a year ago.

“There is still a lot of pent-up demand out there,” said John Ryan, chief marketing officer for Georgia MLS. “And once we get past Easter, we’ll really see the market kick into gear.”

While mortgage rates inched up during the month, they were still lower than last fall. That comparison was good for both sides of the equation: many owners who had been holding back chose to list their homes, while demand was up even more, thanks to many young professionals emerging into homebuying age.

The number of sales was up 23.5% from January — when the market is often slowed by old weather and a holiday hangover — but is still 6.5% below the level of a year earlier, Ryan said.

Inventory — that is, the number of homes being listed for sale — was up 24.9% from a year ago. Yet listings are still well below those in a balanced market, which puts a lid on sales, he said. “We have had both buyers and sellers locked in by higher interest rates. If we see rates stabilize or decrease, that will unlock a lot more of that.”

Mortgage rates, which had been cruising along below 3% through much of 2020 and 2021, climbed to more than 7% in late 2022 and hit a crest of nearly 8% last fall before retreating to 6.6% earlier this year. Rates early this week were averaging about 6.94%, according to the Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac.

Even pre-pandemic inventory — that is, the number of homes listed for sale — had been lower than what experts say is needed for a balanced market in which buyers and sellers have roughly equal bargaining power.

Experts say that was the result of an overall housing shortage. Many owners who might have sold did not have good choices when it came to their next home. That shortage intensified as mortgage rates climbed when the Federal Reserve Bank began lifting its benchmark rate in an effort to fight inflation.

That put potential sellers in a bind. The vast majority of owners had much lower mortgage rates on their homes, so if they moved somewhere else, they’d face much higher mortgage rates. So as rates kept climbing, many who didn’t have to sell simply sat tight.

That has changed, said Reponzell Morris, a broker at Re/Max Around Atlanta. “More people are comfortable with what they are seeing. They think, ‘I’ll go ahead sell my house now, buy something and then when the interest rates go down, I’ll refinance.’”

Even so, it will not dramatically shift the market.

“I don’t think we are at a balanced market, and I don’t think we will be there by the end of the summer,” she said. “We still have a housing shortage.”

For buyers, it is not just rates that nip at their purchasing power.

The median closing price of a home in metro Atlanta is up 67% in the past five years, according to John Hunt, principal of MarketNsight, which tracks the market through the Southeast. Incomes, too, are up significantly — but nowhere near as much.

Between rates and prices, homebuyers must now spend 31.2% of their income on mortgage payments for a median home, compared to 18.9% five years ago, according to Hamilton Fout, vice president of the Federal National Mortgage Association, commonly known as Fannie Mae.

An annual income of $115,430 is needed to comfortably afford the median home in metro Atlanta — nearly twice as much as was needed pre-pandemic, according to an analysis by online real estate marketplace Zillow.

Still, many households with less income can find homes as long as they are judicious in their choices, Morris said. “I know a number of first-time buyers and they often had income below that and they weren’t stretching terribly to buy.”

First-timers accounted for nearly half the mortgages bought by government-backed companies like Federal National Mortgage Association, commonly known as Fannie Mae, according to Black Knight, a data collection company.

Demand has been fueled by income growth and demographics: a large generation now in their 20s and 30s, moving up in their careers, forming households and anxious to purchase their first home.

Noah Giles, 25 , a data analyst, moved from Virginia with his girlfriend last year. They stayed with his brother while they hunted for a home, finally buying a townhouse on the south side of Atlanta for $292,000.

“I didn’t want to overextend myself, so keeping it below $300,000 was pretty key,” he said.

When the townhouse wasn’t ready in late spring, he locked in a mortgage rate of 6.125%, holding on to that until finally closing on the property in September, when rates were rising significantly above 7%.

He knew that even his rate was much higher than typical rates of a few years ago, and that homes in metro Atlanta were much more costly than they were pre-pandemic. But he doesn’t regret buying.

“My goal has always been to own a property and build generational wealth,” Giles said. “It wasn’t the best time to buy historically. But the best time to buy for the future is always the present.”

Metro Atlanta* February housing, compared to a year ago

Units sold: -6.5%

Price: +7.1%

Listings: +24.9%

Metro Atlanta* February housing, compared to January

Units sold: +23.5%

Price: +3.6%

Listings: +7.7%

Metro Atlanta* February Housing

Units sold: 3,916

Median sales price: $399,000

Active listings: 11,975

Mortgage rates

Year high: 7.79% (Oct. 26)

Year low: 6.27% (April 13)

Five-year high: 7.79% (Oct. 2023)

Five-year low: 2.65% (Jan. 2021)

All-time high: 18.63% (Oct. 1981)

All-time low: 2.65% (Jan. 2021)

Recent: 6.94% (Feb. 29)

*Data for 12 counties centered on the city of Atlanta

Sources: Georgia Multiple Listing Services, Federal Home Loan Mortgage Corp.