WHAT’S GOING TO INFLUENCE OUR NORTH GEORGIA REAL ESTATE MARKET?
From Your Friends at Northwest Atlanta Properties
Housing Industry “Experts” analyze the market data to forecast what’s to come. We’ve rounded up a few of the most important predictions for you to consider, but before we get to it, let’s talk about the last 7 months.
Median home prices peaked in June and declined steadily through January 31st. The year ended with the median price for a home in Northwest Atlanta. This set a new annual record of $454,813. Despite this record, the housing market continued shifting towards buyers. Year over year, home sales declined 9.4 %, and inventory increased. Homes spent an average of 38 days on the market, up 32 days from June of 2022. The number of closings dropped from 1222 to 478 – over 60% fewer closings (however the slower holiday season may account for 20% to 30% of this decline.) High loan interest rates and lack of inventory contributed to the rest of these declines.
What’s interesting is that Year over Year, we have seen a moderate increase in median sales prices of 7.37%, which is being reported in the media. So many home sellers feel the market is increasing when in fact, it, has decreased significantly. The opportunity here is that if you are thinking of selling – DO IT NOW! Once the media reports prices dropping, buyers will expect you to “deal” and accept a lower price.
So, what will influence the 2023 housing market?
Steadying interest rates
The Federal Reserve has pledged to slow down interest rate increases in 2023. Mortgage rates are expected to land somewhere in the mid-5% to low-6% range in the second quarter of this year… Pro Tip: Learn more about mortgage rate locks to support your buying power with certainty.
Will Home Prices go down in 2023?
Realtor.com predicts that our market will actually slightly increase by up to 4.7% in Atlanta – our suburbs and recent history indicate they may be mistaken, but they are using year-over-year predictions. We are guesstimating that our market will decline in price by 10% or so.
Affordability slowing home prices
Affordability remains a concern for buyers, but experts hope this will stabilize as home prices hit their first year-over-year decrease since 2019. The affordability challenge is real, but we’re here to help. Don’t be fearful of fluctuating mortgage rates to put off your needs or what is important to you and your family. There’s an old saying in real estate: “Marry the house, date the rate.” It’s misleadingly simple but does contain an element of truth. The average rate for a 30-year mortgage rate was less than 3% in early 2021 and just over that in January 2022. It is now 6 – 7%. Many economists expect rates to continue to increase in the coming months as the Federal Reserve attempts to curtail inflation. At a certain point, this could place the economy into a recession, which typically induces the Fed to reduce interest rates. Of course, it is possible that rates remain high over a long period of time. There is a lot of uncertainty in forecasting this, so proceed with that understanding, and talk to a mortgage professional before making any assumptions.
Sellers are more likely to agree to concessions when homes aren’t moving quickly, covering expenses like home warranty plans and even discount points towards a lower interest rate.
Inventory still lagging
The number of homes for sale will lag behind pre-pandemic levels but will be up from last year, giving buyers more homes to choose from. However, economic factors, including increasing construction costs, and supply chain and labor issues, could cause inventory to fall this year.
Monthly Rent Prices are Expected to Continue to Rise
After 13 months of double-digit increases, year-over-year rent growth slowed to a single-digit pace in the late summer of 2022. Nevertheless, the cooling off does not mean the rental market will return to what was typical before the pandemic within the short term, especially when taking the high inflation rate and the strong labor market into consideration. Since the second half of 2021, the national quarterly rental vacancy rate has been hovering near historic-low territory, in which only 5.6% to 6.0% of rental housing units are vacant compared to over 6% historically. It is the first time since 1985 that the rental vacancy rate has stabilized at such a low level for five quarters in a row. Although rental vacancy ticked up to 6.0% in the most recent data, U.S. renters will continue to face challenges from limited supply and excess demand in the coming year that will keep upward pressure on rent growth. At a national level, we forecast rent growth of 6.3% in the next 12 months, somewhat ahead of home price growth and historical rent trends.
Specifically, rental demand may be stronger in urban areas within big metros, a departure from both recent trends and what is expected in the for-sale market. Unlike the recent trend of renting in the suburbs to take advantage of remote work to lower housing costs, the premium on urban rentals has shrunk sufficiently to draw people back to big cities to enjoy their diverse social and cultural offerings. In addition, rising housing costs, stemming from a twenty-year high mortgage rate and slowing new construction, may keep many potential homebuyers in the rental market longer and thus fuel the already high rental demand. In fact, among recent renters surveyed, only a third (32.3%) indicated that they are considering buying a home within the next 12 months. One silver lining for renters is that despite slowing single-family construction, builders have generally ramped up the construction of multi-family units that are typically rental homes. This is expected to gradually create extra supply for renters, helping to eventually put long-term low vacancy rates in the rearview mirror.
Principal and Interest Payment Pain Point
Below is a chart created by our very own Jon Burke, that shows the free market is working. When the median sales price and interest rates raised the associated payment above $1900 per month, the median sales prices started to decline.
A favor please … can you reply and answer this one question?
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Mike Stott, Jon Burke, and Donna Stott
Northwest Atlanta Properties