Atlanta Real Estate Market Remains Healthy Despite Higher Rates
Now that we have most of the November market data, we can see the effect higher interest rates have had on the local real estate market. The overarching worry surrounding affordability has helped to stoke fears that the housing market is in a bubble leading some to think prices have nowhere to go but down. Combine the increased home values since the pandemic with the higher interest rates we have seen in 2023 and you can see why some have said the real estate market is due for a correction.
Real Costs For Housing Have Gone Up
With a change in payment like this, it's clear that some people have been priced out of some areas in the local market. However, that doesn't mean people have necessarily been priced out of the market altogether. It means that they have been priced out of the highest demand areas but this happens everywhere and all the time. There are still incredible areas for all people to find affordable housing in Metro Atlanta.
While affordability does remain a concern for the long-term health of the real estate market and perhaps a problem woven into the larger economy, it does not appear to have a measurable impact on the overall real estate market in Atlanta.
One place to look for signs of a change that may be on the horizon is the inventory of homes. You can see on this chart that inventory levels of homes available for sale is lower this year than it was at the same time last year by 6%. In November of 2022, there were 16,117 homes available, and at the same time this year, we have 15,138 homes available. It's hard for prices to go down when supply is going down.
New Listings Entered
Trends and cycles are real. The chart below shows just how these trends and cycles work. You can see four consecutive years of data overlayed on this chart and the lines show the same thing every time. New listings entered trend down at this time every year and contribute to an environment of continued low inventory which helps to stabilize prices as well.
Pending Sales Down
This chart does show that pending sales are down and they are down by more than new listings are down - but not by enough to make any appreciable difference in the overall supply/demand relationship. We also know the main reason for the larger than normal drop in pending sales is due to the interest rates at the time these homes went under contract were at the peak. Since that time, the 10-year treasury yield has dropped some 50 basis points and the interest rates for 30-year mortgages have dropped as well. There does not appear to be any economic data on the horizon that would push those rates back up to their peak.
The next two charts go back to 2012 and I think, really help to put the current market into perspective. This first chart shows the active listings by month. We've been in some kind of seller's market since around 2015 in Metro Atlanta and the supply is a critical component of why that has been the case. A quick look at the current inventory compared to the past decade shows just how much inventory would need to change for prices to drop.
Active and Sold Chart
I really like this chart because it visually shows the unsustainable time we just came through where there was little difference between active and sold. you can also see we are still below what would be a historical norm and how far we would need to go to get to a place where prices were falling.
What Does The Future Hold
Of course, none of us know for sure but the right data and interpreting that data does leave strong clues. Combine what we see in the data with what we forecast to happen in 2024 with interest rates and the economy and it's not hard to imagine a scenario where buyers are in multiple offer scenarios again and paying significantly over asking price with terms that favor sellers. On the other hand, it is almost (but not entirely) impossible to see a scenario where prices fall and it becomes a buyer's market. This is the likely scenario:
We are setting up for a very strong Spring real estate market for sellers unless current forecasts change dramatically. Interest rates are predicted to continue to fall and that will result in higher demand in a market with inventories that continue to stay lower year over year leaving us in a severe shortage. This will cause prices to increase at rates that are above average and include all of the scenarios of the recent hyper seller real estate market.