What’s happening in the Atlanta real estate market? Where are home prices headed? What kind of predictions are being made for 2012? Unfortunately, there’s not much in the way of good news. Here is our Atlanta housing market update for the third quarter of 2011.
Home Prices Declining, Despite Small Uptick in Early Summer
At the annual level, home prices in the Atlanta metro area have declined. The latest data from the Case-Shiller Home Price Index shows a decline of -6.3% during the last year (August 2011 compared to the same month in 2010). This was the third-largest decline of all 20 metro areas tracked by the index. Only Phoenix and Portland had bigger annual price declines — 7.7% and 7.6%, respectively.
The Atlanta housing market received “special” mention in the press release accompanying the Case-Shiller report: “Atlanta and Las Vegas saw their annual rates of change fall deeper into negative territory,” the release stated.
At the monthly level, the Atlanta real estate market experienced a price decline of -2.4%, from July – August 2011. In this category, the city stands alone in unenviable territory. This was the largest monthly decline of an city in the 20-city index.
There was a modest increase in home prices from June – July 2011. This was probably due to the usual seasonal patterns of home buying. But these modest gains were wiped out by the -2.4% decline seen in the following month.
Increase in Residential Real Estate Sales in Atlanta
When measured in year-over-year fashion, home sales in Atlanta rose significantly in September of this year. Single-family residential real estate sales were up by almost 25% in September 2011, compared to the same month in 2010. This could help the Atlanta real estate market deal with one of its biggest obstacles to recovery — excess inventory.
The supply-and-demand picture in the area has long been lopsided. Too many houses for sale, not enough qualified buyers to go around. The same could be said for most cities in the U.S. right now. If home sales in Atlanta continue at a higher pace than last year, inventories will eventually fall back into balance. It just hasn’t happened yet, as evidenced by the still-falling home prices in the metro area. “Eventually” is the key word.
Vacant Homes are Stalling Recovery
Vacant homes are another big problem for the Atlanta real estate market. In this context, we are talking about homes that have been foreclosed upon but not sold. They stand empty. They add to the downward pressure on home prices. They push any hope of housing recovery further down the road. Most of these homes are actively listed for sale. There just aren’t enough buyers to absorb them all. This excess inventory is one of the top two reasons for declining home prices in Atlanta. (A shortage of qualified buyers is the other reason.)
The city of Atlanta has announced a novel approach for dealing with this problem. Mayor Kasim Reed recently said that city officials are working with one of the largest lenders in the country to create an incentive program. Under the program, Atlanta police officers and firefighters would be offered reduced mortgage rates when buying a foreclosure home in the city. Mr. Reed said that more details would be forthcoming. The bank in question has not been named yet.
If the program succeeds at reducing the number of vacant foreclosure homes, it could have a positive impact on home prices over time. As it stands now, these homes are doing nothing but putting more drag on housing values. The Atlanta real estate market could benefit from these and other aggressive ideas to reduce inventory.
Atlanta Foreclosures Rise in Third Quarter
According to RealtyTrac, the number of foreclosure filings in Atlanta rose in the third quarter of 2011, when compared to the previous quarter. The company said that one in every 89 housing units in Atlanta would receive a foreclosure filing this quarter. Statewide, only one in 352 housing units are foreclosure properties.
These filings mark the beginning of the foreclosure process, which can take weeks or even months to complete. So many of these homes won’t actually get foreclosed upon until 2012.
A rise in foreclosure filings usually correlates to a subsequent rise in total housing inventory. This in turn puts downward pressure on home prices, especially when there is a shortage of qualified buyers. These will be major challenges for the Atlanta real estate market in 2012.