Home sales up as prices plummet

Market reels from foreclosures, but volume may help housing in the end

The median sale price dropped nearly 15 percent across the region in 2011, to $115,000 from $135,000, the data shows. By a separate measure, Atlanta’s price index has now dropped almost 40 percent from its peak, to the same level it was in 1996.

And in a further sign of the region’s dysfunctional housing market, the price drop came even as overall home sales rose sharply in 2011, the most recent full year of data, and inventory fell.

Prices typically rise with stronger sales. But metro Atlanta’s prices are being pushed lower in part because foreclosures and low-end homes dominate sales, accounting for about half of all transactions in some areas.

Industry experts say the hopeful news is that the rising sales volume, driven by investors snapping up rental properties and bargains, should flush out distressed inventory and eventually lead to a price rebound.

Generally, home prices fell less — or even rose a bit — in desirable and pricey areas. A few ZIP codes in Clayton and Henry counties saw prices tick up in 2011 simply because they had fallen so far that investors are now buying homes to turn into rental properties.

But across the rest of the metro area, from Cherokee to Fayette and west Cobb to Rockdale, prices fell by more than 10 percent in many ZIP codes.

The moribund market keeps many potential home buyers stuck on the sidelines — unable to sell their own homes to move into a new one or faced with values slipping below what they owe on their mortgages.

Those who can buy are faced with a different issue: the inventory of available homes is at a 10-year low, so competition and bidding wars are common for homes in desirable areas such as Alpharetta, Buckhead and intown Atlanta.

“We thought we were going to find a house with ease,” said Tiffany Torbert, who started home shopping in Atlanta’s Virginia Highland area with her husband, J.R., last winter. “It’s been very shocking for us.”

Gauging the comeback

The AJC’s analysis shows that sales volume in a nine-county region rose in three of every four ZIP codes from 2010 to 2011.

It’s the first overall sales gain since 2006, when the market began turning down. By 2008, volume was down in nine of 10 ZIP codes, figures provided to the AJC by Marietta real-estate analysis firm SmartNumbers show.

Only 12 of the region’s 128 ZIP codes pulled off the dual feat of showing increases in both median sale price and number of sales. Sellers and real estate agents hope those hot spots are a harbinger of better things to come.

“We’ve been talking this might be the bottom,” said Dan Forsman, CEO of Prudential Georgia Realty. “Barring some catastrophic outside event, it sure looks like to me it is.”

Don’t expect a fast comeback, however. Even optimists predict a slow recovery in 2012 and 2013.

Stan Humphries, chief economist with online real estate marketing and pricing firm Zillow, thinks metro Atlanta prices have not hit bottom. He predicts another loss of 4 percent this year, but added the rate of decline is slowing and said increasing sales are key to cleaning out the market.

“We are selling more homes and that is the important requisite before putting a bottom on prices,” he said.

Home prices matter, even to people who don’t plan to sell any time soon. A home is typically a family’s biggest asset and its value often figures prominently in career mobility and retirement planning.

Home values also contribute to what economists call the “wealth effect” on the broader economy. Rising values make people feel more confident, and they are more apt to spend. Falling prices have the opposite effect.

Every major U.S. city has taken a hit since mid-2007. According to the Standard & Poor’s Case-Shiller Home Price Indices report, which tracks repeat resales to establish price trends, the decline for all 20 cities tracked is 32 percent. Several cities had bigger declines than metro Atlanta’s 40 percent loss. Prices in Las Vegas, for instance, cratered by 60 percent.

But since mid-2011 Atlanta has been among the most troubled markets in the monthly Case-Shiller report. The region’s score has fallen steadily — nearly 18 percent in March, compared to the same month a year earlier — even as other hard-hit sunbelt cities such as Phoenix show small gains.

Among the 20 metro areas tracked, only Detroit had a lower index score in March.

Inventory at issue

Optimists say the rising sales will enable a price recovery — although the pace of appreciation won’t rival the gold rush days of the mid-2000s.

And with many potential sellers on the sidelines awaiting a rebound, inventory also is dropping fast: from more than 70,000 homes for sale in 2007 to less than 30,000 in 2011 — a 10-year low.

The low inventory means competition and bidding wars for houses in desirable areas. That’s disappointing for people who thought the down market would mean good prices and lots of choices everywhere.

Tiffany and J.R. Torbert lost bidding battles over three homes in their target area of Atlanta’s Virginia-Highland neighborhood.

“One house listed for $240,000, and we offered $270,000 and didn’t get it,” said Tiffany, 32. Their agent, Laura Melson with Keller Williams Realty Peachtree Road, finally found an owner who wanted to sell but had not openly marketed the home. The Torberts negotiated with the owner in private and were able to buy their Virginia-Highland home in May.

The couple is keeping their prior digs, a two-bedroom Midtown condominium they bought for $169,900 eight years ago, because they don’t want to sell at a rock-bottom price, Tiffany said. A similar condo nearby sold recently for $70,000.

Their situation sums up a conundrum that has held down non-distress sales: Homeowners who would like to move must first face the challenge of selling their current homes.

One reason inventory has fallen is that many middle-income owners can’t afford to sell or are waiting for prices to perk up before trying to move up, down or out. A recent national survey based on an analysis of nearly 800,000 metro Atlanta mortgages showed that about 55 percent of owners owed more on their mortgage than their home’s value. That means they would lose money on a sale.

“A lot of these owners who would otherwise sell can’t afford to sell,” said Prudential’s Forsman.

Debby Braun, a Keller Williams Realty agent, said it’s even difficult to get owners with positive equity to put a house on the market. They may want to sell, but they remember the days when their house was worth 40 percent more than it is now.

“They want to wait for their house value to come up,” she said. “But by the time it does, so does the price of one they are going to buy.”

For now, that leaves a big chunk of the market to foreclosed homes; short sales in which a bank takes less for a property than the value of the loan; and sales by people who have to relocate for a job or other life change.

Foreclosures, traditionally about 10 percent of the market, have been closer to 40 percent in metro Atlanta in recent years. That pulls down median prices, scaring middle-price home owners from putting homes on the market or making buyers believe prices in hot-selling areas ought to be lower than they are.

Gwinnett, a builders’ paradise during the housing boom, has been a leader in foreclosures since. It also has among the highest rates of “underwater” homeowners who owe more on their mortgage than current value. It did not have a single ZIP code where sale prices increased from 2010 to 2011. ZIP codes in south Gwinnett generally had lower prices and those in north Gwinnett, such as Suwanee at $178,750, held up better though they still lost value in double digits.

Deals and investors

Four ZIP codes where both sales and price improved are from the lower end of the housing scale. They had suffered some of the largest sale price declines in the region.

Two are along Powder Springs Road in south Cobb County; one covers a swath of south Clayton and south Fulton counties around Fulton Parkway; and one is at the borders of DeKalb, Henry and Clayton counties. Home prices there are being pushed up by good deals — some homes have lost more than 50 percent of their value — and by investors competing for bargain-basement homes to be turned into rentals, real estate agents say.

“I have sold four in the last couple of months to investors, and none to homeowners,” said America’s Realty agent Juanita Ayers of the area, which runs along Powder Springs Road. “I sold one [house] for $49,528 two weeks ago. I sold [the same house] for $164,000 maybe five or six years ago,” she said.

The good side of low home prices is that they allow some to buy who would have been priced out of the market by top-dollar prices and higher interest rates. Interest rates have dropped to historic lows below 4 percent.

Melissa Belle, an assistant director of financial aid at Clayton State University, and son Omar moved into a rental home in 2009 in Henry County. A recent divorcee, she had thought she would not be able to buy a house for quite a while.

Great prices on homes got her attention, so she began looking around. When the house next door sprouted a for-sale sign she moved quickly. It was a short sale, and she bought the home for $95,000 — about half the previous sale price of $180,000 — and got a 30-year loan at 3.875 percent. The payment is less than the rent she’d been paying, leaving enough money to repaint and re-carpet the home and take on a new car payment.

“If not for great pricing and low interest, I would be renting still,” Belle said.

“It is such a buyer’s market,” Belle said. “So many people are losing their houses and that is so unfortunate. But for me here and now [to be] able to take advantage of the prices is a blessing.”

And like legions of homebuyers before her, Belle has faith she will ultimately come out ahead.

Yet in every county a majority of ZIP codes saw sales increase, and that gives buyers such as Belle great hope for the future of her investment.

“I feel like [the market] is going to go up,” she said. “I feel like in five years I am going to have lot of equity in this house.”

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The Biggest Gain:

30294, Ellenwood

This part of Henry County had the biggest gains in 2011: up 22 percent. However, the median price was $56,500, that’s still a 68.9% drop since the height of the market in 2007.

The Biggest Loss:

30337, College Park

This city in south Fulton had the biggest price drop: down 45.7 percent since 2010. The median price was $57,000, a 69.2 percent fall from 2007.

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Counties at a glance

Here’s a look at median prices and percent change in the ZIP codes that had the best and worst price performance in 2011.

CHEROKEE

Best: 30183

$164,877, +1.2%

Worst: 30102

$94,400, -27.4%

CLAYTON

Best: 30349

$36,000. +11.6%

Worst: 30228

$51,100, -34.5%

COBB

Best: 30106

$56,550, +13.1%

Worst: 30067

$78,500, -34.6%

DEKALB

Best: 30306

$400,000, +5.3%

Worst: 30084

$98,310, -29.8%

FAYETTE

Best: 30269

$225,500, -8.6%

Worst: 30214

$125,000, -15.3%

FORSYTH

Best: 30005

$323,000, +16.7%

Worst: 30004

$172,500, -21.6%

FULTON

Best: 30004

$330,000, +15.8%

Worst: 30337

$57,000, -45.7%

Gwinnett

Best: 30097

$250,000, -2.5%

Worst: 30071

$51,400, -42.9%

Henry

Best: 30294

$56,000, +22.2%

Worst: 30228

$85,250, -30.7%

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