IS THE HOUSING MARKET BUBBLE ABOUT TO BURST?
From Your Friends at Northwest Atlanta Properties
Questions we’ve been asked lately:
“What’s going on with housing prices?”
“Why should we buy now when the market is sure to decline?”
“Is the housing bubble about to burst?”
We hear these questions quite a bit from people nervous about the economy, bank failures, real estate, employment, and other sectors. When it comes to housing, in our opinion, there are a lot of buyers still hot on the trail of a continuing shortage of houses. As Donna Stott states – “It’s all about supply and demand.” Right now, we do NOT have enough supply for the demand. Which means prices are NOT coming down much if any unless that supply/demand ratio changes.
Dave Ramsey is someone who has shared his insights on this topic in the public sphere recently. He is a well-known economist in the media, a New York Times bestselling author, columnist, speaker, and radio host who provides his opinions on business-related topics.
I heard a Ramsey clip recently that made me think of Donna. He said simply, “Housing is not going down in value. Things go up or down in value based on simple supply-demand economics. We have a shortage of housing and not an oversupply.” Ramsey went on to say, “The growth of home prices is slowing down. But the bottom line still is: We still have too many buyers chasing too few houses.”
Why are there not enough houses?
There are several factors that are influencing low supply. One is that new homes being built for the past 14 years was below the 60-year average rate. Some economists predict that we are 4 million or so homes short.
Which means even if builders ramp up and build an additional 400,000+ homes a year that it may take 6 to 10 years to catch up. And what we’ve seen in the past 2 to 3 years is slower rates of new builds not more.
Also disconcerting are two other factors: Some counties have been putting moratoriums on new builds, including Cherokee County for a year starting 12/2022; And the types of homes that ARE new builds are not attainable for most first-time buyers anyway.
Another factor in low supply is that the low interest rates that many homeowners have now, will cause them to feel stuck. (rate-locked) in their current homes because the cost of a new mortgage is so much more. Many who might trade up or right-size will instead stay put. Staying put means less inventory of homes for sale.
Our sense is that for the next handful of years, we will likely continue to experience price increases, but not at the pace seen over the last 36 months.
So, even if there are a few months this year where year-over-year values are a bit lower, from a housing investment perspective our market continues to be a wise choice.
In other words, the real estate market is still strong; it’s just not crazy like it was in recent years.
Homes in very good condition and priced commensurate with the market can still generate multiple offers and sell over the asking price, often within a short time of going on the market.
Take the last 12 months, for example; over this period, home values are still up by 2%. While the absolute number of homes being sold is down quite a bit, the values are not.
Here in Northwest Georgia, there are other factors working to our benefit. In our view, the most impactful influences are our employment trends and the geographic desirability of our area.
Positive signs in job growth have endured since our pre-Covid-19 peak in early 2020, when we outpaced the national economy.
Atlanta’s continued role as a popular relocation destination for businesses (Including Qcell in Cartersville), as well as the ongoing numbers of people moving here from other parts of the country, including New York, Chicago and California, cause optimism about increased values for the foreseeable future.
We work primarily in 12 zip codes. As I wrote this article those 12 zip codes had a total of 919 active listings. That’s 919 listings for the more than 3000 agents in the area.
The median list price in those 12 zip codes is $575,000 and that median house has 2560 square feet of living area. The median listing has been on the market for 56 days.
Over the last 6 months we’ve closed 2729 homes (455 a month) with a median sales price of $430,000 for homes on the market for 31 days.
The median sized home of those that closed was 2308 square feet.
The median home on the market is priced at $145,000 more than the median price. There are only 281 homes for sale at or below the $430,000 median sales price.
The snapshot of “Year over Year Price” is starting to show prices in flux with the number of sales dropping from 1118 to 837 (25% fewer closings) but over-all the prices have increased by 1.9 % since 2022.
Property Management Insights
New Homes: 19 of our Investor Clients like to buy new construction homes due to the advantages of all new appliances, roofs, etc. This eliminates worry about losses in repairs for at least several years.
The problem is that very few builders will currently sell their new product to investors.
We have had great success with the Bridlewood Farms subdivision built by Starlight homes in Cartersville. We own one ourselves and they are winding down this subdivision. We expect them to be sold out of their remaining 30 or so homes by August.
NOTE: We have a tremendous relationship with them and can often find a home for an investor that never hits market.
If you’d like to explore whether one of these few remaining brand-new investment homes is a good fit for your portfolio let us know ASAP.
And lastly, we want to say THANK YOU to all of our clients!
Our small family Team is now helping over 75 owners manage their homes.
On a final note: Cobb and Cherokee counties both ranked in the top 10 of Georgia’s 159 counties. See the rankings here!
We continue to appreciate your business and referrals to us,
Mike Stott, Jon Burke, and Donna Stott
Northwest Atlanta Properties