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 :-)
That's good info for your local buyers and sellers. I agree, if we don't go into a depression, things will get much better in the real estate market. I still think it's a great time for buyers anyway, values are down and money is cheap.
For me personally, another indicator that the market is on the way back is the talk I hear from our local mortgage brokers who are getting a lot more requests for pre-approvals.
No one can predict exactly when the market will have bottomed. By the time we all figure that out, it will already be on an up swing.
Ryan, I took a look at your blog entry to see what is happening in the Atlanta area (a great place to visit). Hopefully the prophet in you (informed by the stats) will prove to be correct. I don't expect prices to increase much in the Austin area in 2009. Hopefully they will continue to be fairly stable, though we are seeing some downward pressures in both new and resale markets here.
Appreciate all the hard work in the article. There are many factors that will determine the outcome of all of this. The return will be slow.
Great post. It is relevant to the rest of the country as well. There was an article last week showing that the median home price in San Diego County rose for the first time in a year. Of course, the places that continue to see foreclosures will continue to decline, but other areas are starting to bottom out. Nothings going to turn around this year, but it does look like the decline will slow in most places and stop in others.
Excellent work as usual Ryan. Good points about how New Construction prices having a solid bottom due to the cost of raw materials whereas resales can continue to drop. I think we all would agree, the larger the gap between new and resale, the slower the recovery for the new homebuilders.
A similiar circumstance is happening in the Automotive industry currently. With the credit crunch and downturn in the economy, the car-buying public has radically shifted to used vehicles. The Big 3 along with thier Asian counterparts cannot lower the prices of their new cars to compete. However, the price of used cars is now increasing significantly due to increased demand. This is the same economic cycle we will see in the real estate industry over the next few years as all of these re-sales are bought up over time.
Wow great data...you could charge for this information :)
I think (crystal ball moment) we could be in for a bounce this summer and if it does happen I believe it will happen fairly quickly as many side line players will act once they see the ship setting sale (stocks and homes are one of the few items most consumers hate to buy on sale but once they see the sale ending they will crowd the registers!).
The main factor derailing this possible train is 1.) continued high job losses 2.) Government programs (some things with good intentions have very bad results).
Look forward to the spring/summer home buying and moving season.
Hey Ryan, I think in Nashville we have reached the bottom. The perception is still out there that there are deals to be made and people are coming off the fence to buy. Once they get into the buying frame of mind, they start to see what is available and this puts them in to buying mode...and once that starts it's easy for people to get caught up in the buying process and start buying emotionally again. This has lead to a number of multiple offers where the homes have become so well priced that buyers see the value and are willing to pay over and above asking price. Even the local new media has caught on to the positive news.
I think it's still going to be a long haul back to any where near a resonable market but fior now things are definately improving for the buyers...sellers still have to take solice in that if they are buying within the same area then they too get to take advantage of the buyers market!
Site looks great Ryan. Good job.
Phenomenal post Ryan. Your graphs reflect a good focused analysis of what is happening in the real estate market. I totally agree about going back a full year when comparing and not just one month or even 6 will show as accurate a picture. The feedback that I have been getting from mortgage reps is also that they are busy and not just doing refinances...they are putting together pre-approvals...alot for first-time home buyers due to the tax credit. I guess we can only wait and see how the real estate market develops. Thanks for all your work in putting this together!
Great stats Ryan. I think you're spot on. We're seeing the same type of numbers here. I think we'll still have foreclosures and short sales being the strongest selling market for the next while, but things are looking brighter for "normal sellers". If only we had a crystal ball...
We are seeing a weak but improving market as well. It looks like December/January was the low point (looking at how down it was compared to a year ago). Recently the year over year results are down but seem to be improving. If the economy improves hopefully we should see some decent sales volume.
Excellent article. I do hope for everyone's sake things do improve soon.
Things seem to be picking up here in Halifax after a really slow winter\start to spring. Heres to a prosperous summer(hopefully) and fall.
Fantastic job, Ryan. I think that I will revisit this information next March and see if your predictions are true. I sure hope they are! Things truly always do get better....
Ryan, you are a true authority in the Atlanta Real Estate Market. I do believe your predictions are true, and yes this is a scary market. How do long do you feel it will take the United States as a whole to recover when we've been in debt for 60 years. Either way, homes are going to sell, so force registration to survive in my opinion.
When is the next update? You should do these quarterly.
I'm starting an update today - back from vacation....
I first owe Jessica a new post and then I'm going to work on some statistics. The numbers will be interesting to see how the tax credit is skewing pending sales and hopefully reducing inventory numbers.
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