Spring Market Update for Metro Atlanta
The ups and downs (mostly downs) of the market are likely to continue, at least for most of this year and there is a good chance that the next six months will be the hardest summer selling season yet if you are a seller, but, the statistics are definitely showing some important and changing trends that you probably are not hearing about on the news. What we need to look at is one month from one year compared to the same month from a previous year. This counterbalances annual cycles like the ones that we have here in Atlanta. That's the case everywhere, but I digress. An increase in December over November is meaningless to the market as that is the case every year.
Below are a few sales graphs that I want to explain before you read them and then I'll add some further information below them. The first graph is all residential sales volume of single family homes by month. Below that is only new construction sales. The third is all non-new construction sales. Before you look at them, I want to explain why I did this. A few weeks ago, we had a presentation in our office explaining that the median price difference in Atlanta between new construction and similar resale homes was at an all time high of $122,000. This difference in afford ability has created a very interesting scenario in the real estate market in Atlanta that will begin playing out later this year and will mark the beginning of the end of the downturn locally unless something else terrible happens.
Remember this point for later: New construction cannot come down in price while resale home value can drop. It's going to be important to see what's happening in the market.
O.K., let's look at these graphs. The first is all residential single family sales in Metro Atlanta for 2007, 2008:
What I haven't graphed for you is sales price, but, I figure you don't need me or anyone else to tell you that prices have come down. Remember, moving forward, this becomes a simple issue of supply and demand. As prices drop, sales volume will increase. Next let's look only at what has happened to new construction sales volume:
This graph has the January sales numbers, but they are really inconsequential for now. What I really want you to notice is what is happening to wards the end of the year. Remember earlier, when I pointed out the difference in resale and comparable new construction, that new construction pricing cannot drop the way resale prices can and that as prices drop, sales volume will increase. Now go back to the first graph and and take a closer look at the end of the year sales volume from 2007 and 2008. Notice that it is closer to the same than new construction is by itself. It's clear then that new construction prices have more to fall if they are going to begin to get to a point of year over year sales volume increase.
Now let's look at what is happening in the largest segment of the Atlanta real estate market - residential resale:
Do you see what's happening? There is a lot for all of us to be excited about in this graph. Because residential resale prices have fallen, we should begin seeing year over year sales volume increases this summer consistently and don't be surprised if we see a few months earlier than the end of summer where year over year sales volume is above that of 2007. This will be the first real sign that the market is making a change! Don't go overboard. It's just the beginning and it won't start in earnest this year, but, it is happening.
Now, don't think that this means sales prices are going to increase anytime soon. I don't think that they are and there is nothing to indicate that they are, but, they can't even begin to level off until the inventory of homes meets the sales volume somewhere under 10 months of supply. Of course, we will never get to that point unless sales volume increases. That begins with year over year sales volume increases and that is what we are going to begin seeing this summer.
O.K., O.K., the caveat: This will not happen if the greater economy continues getting too much worse, but, it is likely to happen even if the unemployment rate reaches 10% nationally and it will probably be 10% in Georgia this summer anyway. There is nothing that is in the air to stop those type of unemployment numbers. But, when and ONLY when we begin to see year over year sales volume increases can we begin to get out of this devastating hole that we are in.
So that's it. The trends are here. We are at the top cusp of the bottom of the market. There will be no real way to see that actual bottom until it passes. For some segments, it's here right now. For others, it's still at least a year away, most others are somewhere in the middle, but, know this: We are at the beginning of the bottom, unless the recession turns to a depression. Your welcome to bookmark this and come back in march of 2010 and tell me whether I was right or wrong :-)