Metro Atlanta Real Estate Market Trends December 2023
Median Sale Price: $380,000 (down from Oct, $385k)
Median Days on Market: 17 (Up from 15 days in Oct)
Months Supply: 2.8 (no change from Oct)
% of Original List Price Received: 98.3% (down from Oct, 98.9%)
November Closed Sales: 5261 (down from Nov 22, 5966)
Average 30 yr FRM Interest Rate: 7.03 (Source: St. Louis Fed as of 12/7/23)
General Observations: The metro Atlanta market continues to cool, thanks to higher interest rates than recent years. With rates scaring off many buyers, inventory continues to creep up month-over-month, and we have finally reached pre-pandemic inventory levels again. However, before you arrive at the conclusion that many click-bait articles are trumpeting (namely, a "housing recession") note that we are still firmly in a seller's market based on inventory ranges. Historically 4-6 months of inventory is viewed as a balanced market, anything below that is a seller's market; we are currently at 2.8 months of inventory. Second, consider that prices are only down 3.8% from all-time highs earlier in 2022 and 2023, and are still 56% higher than January 2020 prices. And that's not even accounting for typical seasonality cycles, with low-season from approx November until March, when average prices typically fall, regardless of overarching market conditions.
My Take: In my opinion, what we are seeing here is a temporary drag on demand, that is slowing the overall market; and if rates drop substantially, the market will begin heating up again. Why? Well, in addition to the above-mentioned anemic inventory levels, [new home starts are still relatively low](https://fred.stlouisfed.org/series/HOUST), and the raw number of real estate transactions is down approximately 25% compared to the last 4 years. This means that some consumers who would otherwise be moving, aren't. And when people who want to move put it off, that equates to future demand. For example, a hypothetical homeowner who has been putting off selling their 3/2 to upsize into a 5/3 may not be in the market now, but they will be eventually because the need for those extra bedrooms has likely not gone away. Furthermore, the only downward market pressure variable that we've seen correspond to this slowdown is rising interest rates, so it stands to reason that if/when rates fall, that downward pressure will abate, and underlying supply issues will resurface as the predominant market driving factor. Personally, I expect that if and when rates hit 6-6.5% again, or maybe even just sub-7%, a portion of these consumers will re-enter the market, demand will spike, and prices will once again start rising. If rates continue to hover in the mid-7s for the foreseeable future, I would expect prices to continue to fall thru January, and then start rising again in late winter/early spring, though any such oscillations will be muted.
As far as which of these scenarios seems more likely Fed Chair Jerome Powell has, within the past week, reiterated that the fed will likely keep rates "higher for longer," and so far, his track record of candid comments has been predictive of fed policy, so I think that the second scenario above is more likely. However, markets seem to think the FFR will drop going into 2024, and mortgage rates aren't set by the fed, just influenced, so some independent, mortgage specific downward movement in rates could occur, even if the fed does keep rates higher.
One variable I can't account for here is the number of homes being bought/sold by corporate buyers. Data on that portion of the market is squirrely, and my gut feeling is that it varries based on the price of borrowing money, just like regular consumers.
If I were in the market for a home, I heavily towards purchasing now vs waiting on rates, because the current slow market give buyers leverage that they haven't had in recent years. If buyers wait for a substantial rate drop, they'll likely be competing with tons of other buyers again if/when that happens. As the old addage goes "time in the market beats timing the market." However, I am of course biased towards purchasing real estate.
Note: I don't have a crystal ball, if I did I wouldn't be writing real estate newsletters, I'd be sitting on a beach in Tahiti sipping Mai Tais. Everything here, besides the actual numbers, are opinions/conjecture based on my experience and past trends.