Atlanta took longer than most large cities to recover from the recession almost a decade ago, but in 2015 the housing market is rebounding, thanks to affordable pricing and lightning fast sales. Atlanta has now emerged as a hot market and fears that a housing bubble of 2006 proportions is imminent have started to rise.
However, most intown Atlanta neighborhoods are marked by a distinct lack of inventory, and home prices have risen slightly but not as dramatically as before the bubble. Additionally, rising interest rates in the near future will cool down the market, and lending has remained strict since the collapse.
Below are five reasons a housing bubble is unlikely to occur in Atlanta:
- There is a lack of inventory in most intown Atlanta areas. The Atlanta housing market has seen an upswing in recent years, with properties selling quickly and offers above asking price becoming commonplace due to the lack of inventory in some central neighborhoods. This trend shows no signs of slowing, with supply in Atlanta low enough that buyers will continue to compete against other bidders to secure a house. According to Metrostudy, Atlanta has a housing supply of four months compared to the normal six to eight month supply in the region.
- It’s still difficult to secure a mortgage. Some buyers struggle to secure mortgages due to strict underwriting standards implemented after the housing crisis. The first housing bubble inflated due to demand enhanced by loose lending. Current stringent lending practices will prevent this surge of buyers from causing another market swell.
- Home prices aren’t as high as before the bubble. The Atlanta housing market may be rebounding, but it’s largely an affordable market despite predictions of increasing home prices. According to the S&P/Case-Shiller Index, home prices are slowly rising but are still 9 percent below the peak before the bubble burst. This slight increase is occurring because current homeowners remain fearful, but as the current market continues improving, more “For Sale” signs will pop up as homeowners trade up or downsize without worry.
- Interests rates will most likely rise, stabilizing the market. According to a Reuters poll of economists, the economy is stable enough for the Federal Reserve to raise interest rates at least once this year. However, due to the recent volatility in the Chinese and world markets, the Fed may wait until its December meeting to make a decision.
- Buyers aren’t flipping houses anymore. The trend of “flipping” houses – buying a dilapidated home or condo, revamping it, and selling for a higher price – is a thing of the past. The number of foreclosed homes – the preferred property for flippers – has dropped to the lowest rate since pre-recession times, according to CoreLogic’s recent Foreclosure Report.
Due to these current market factors, Atlanta is not at risk for the development of a housing bubble in the near future. As long as lending requirements are high and inventory and housing prices are low, Atlanta should be safe from another real estate crash.