Metro Atlanta homes, on average, were up 1.3 percent in June from the month before and 5.4 percent from a year ago, slightly better than the national average, according to Case-Shiller analysis. And the trend lines – along with strong recent construction – bode well, said David Blitzer, chairman of the company’s index committee. “These data point to a stronger housing sector to support the economy.”
Nationally, prices were up 4.5 percent during the past year.Ironically, sometimes the threat of higher mortgage payments is enough to spur people to buy a home soon, said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.
The Federal Reserve has been debating an increase in interest rates, yet that first boost might be good for the housing market, he said.
“That will be a sign to fence-sitters: This is the time to buy, because this is the lowest rate,” he said. “The cost of renting has been going up and the cost of buying has been going up, so the time is now.”
Atlanta is pretty much in the middle of the pack for price increases among the nation’s 20-largest metro areas: tied for tenth with Tampa.
Other surveys use different calculations, but virtually all show Atlanta prices rising much more slowly than a year ago or year-and-a-half ago.
But beware of over-generalization, warned Jude Rasmus, head of real estate for Virgent Realty in Atlanta. “There are so many micro-markets.”
The starkest contrast is between the in-town, city market and that of the suburbs, Rasmus said. “The inner city market has caught on fire. I think it can keep going. Outside the city, it’s the places with the best schools. It always comes down to location and schools.”
After a long and painful collapse starting in 2007, the Atlanta market suffered through a dramatic drop in home prices, tens of thousands of foreclosures and large-scale purchases by huge institutional investors. About three years ago, with the economy growing, the housing rebound began: Prices on average are up more than 50 percent from the 2012 trough, but they are still 8.5 percent below the peak, according to Case-Shiller.
Even so, in many neighborhoods, prices have not bounced back and thousands of homeowners still owe more on their mortgages than their homes are worth. That effectively prevents many homeowners from putting their homes on the market.
Yet on the demand side, there is also a missing piece: first-time homebuyers.
“Typically, first time homebuyers represent 40 percent of all buyers,” said Jonathan Smoke, chief economist for Realtor.com. “In July, it was 28 percent.”
First-time homebuyers are considered a crucial part of the market – snapping up low-end homes and catapulting their owners up the chain to more expensive houses.
But first-time homebuyers have been held back by a combination of factors, Smoke said: they have had trouble saving up enough to make a down-payment and many have struggled to find good-paying jobs.
“But I would argue that getting credit is the most important,” he said. “Clearly only the highest qualified buyers are getting mortgages today. And 97 percent of first-time homebuyers require credit.”
Young adults have been slower to live on their own, slower to get married and slower to buy homes than previous generations, said Selma Hepp, chief economist, of Trulia, a California-based real estate research firm.
But ultimately, those people are fundamentally no different than their elders, she said. A Trulia survey showed 89 percent of millennials want eventually to own a home. “That’s a lot of people coming into the market – if they follow their plan.”
Hepp said the crucial factor is job growth.
Among the 100 largest metro areas, there’s been an average of 10 percent job growth since the bottom of the job market, while Atlanta has added roughly 7.5 percent, she said. “The recent numbers have been good, don’t get me wrong.”
But American home ownership rates have been slipping since the first signs of trouble in the subprime market about a decade ago. Don’t bet that millennials will give that a quick bounce, said Jon Gabrielsen, president of Atlanta-based Gabrielsen Consulting.
There are just too many people in other generations who have shifted from owning to renting or just held back from home ownership, he said. “The youngest folks could leap to record ownership levels and it would not make the trend change direction.”
BY: Michael Kanell The Atlanta Journal-Constitution