I recently received an email which I agree with. It said: " The market facts tell us that-right now-there is a truly unique window of opportunity for well-informed buyers of residential real estate. As we look back historically, there have been previous "windows of opportunity" for buying real estate, stocks and other investments. How many times have we heard those familiar words, "I sure wish I had bought when ....?"
First let's review the national market. We hear all over the media terms like "real estate recession" and "real estate bubble." Yes, that does get attention - which sells advertising. That is how the media makes money. So let's review some of the facts that will help you make money!
CNN Money reported on September 25th that "Home Sales Dropped For The 6th Consecutive Month To The Lowest Levels In 5 Years." And that is true. However, the national market is largely the story of 7 states. California, Nevada, Arizona and Florida had huge run-ups in prices driven by speculators and flippers.
Those markets are now correcting as they should. Midwestern states like Michigan, Ohio and Indiana are suffering from population trends moving in the wrong direction.
Foreclosures have been increasing as adjustable mortgages and other "exotic loans" reset to higher payments. In October, we will see a peak in ARM adjustments for 2007. Another significant adjustment will occur in March of 2008. The result will be several million homeowners with substantially higher monthly payments. That means more foreclosures are likely ahead. The sub-prime crisis and some questionable lending practices have led to a serious restructuring of the mortgage industry. Fifty mortgage lenders have already closed their doors. This led to the recent Fed actions including pumping $38 billion of liquidity into the market, lowering the Fed funds rate twice by a half point, pushing legislation to allow the FHA to underwrite more mortgages and for more disclosure in the mortgage process.
More foreclosures will create more supply and even better opportunities for buyers. Caution: Buying foreclosures is much more complicated than most realize. Prudential Georgia Realty has agents that specialize in this market segment.
New home construction is challenged. Builders were over-building in many markets and are now stuck with significant inventories. This is especially the case in the western states and Florida. Many of the large public companies in this segment are seeing their stocks tumble and shareholder lawsuits are growing. Homebuilders have stopped building spec homes in most markets until they finish moving their inventory. New homes supply is significantly dropping which means that the current overall supply will be absorbed faster than normal. That means that this buyers market will not last.
So what does all this mean to Atlanta? Atlanta did not experience a big run-up in prices and has great prospects for the long-term trends that will positively affect home values. In the first half of 2007, the Atlanta real estate market was off slightly - running around 2004 to 2005 levels. Since June, there has been a significant drop. In August, Smart Numbers reports that closed sales were off 34.6% which is the largest decline on record since 1996. Pended sales and units were off even more. Significant market declines create buying opportunities.
So what is causing this? There are multiple factors including:
· Potential buyers that cannot sell their existing homes - especially those moving from other markets.
· Potential buyers that can no longer qualify for the mortgage on the price of home they wanted to buy.• Potential buyers simply waiting on the sidelines trying to figure out - "when is right to get back in the market." Much of this is caused by media-driven fear and consumer confidence is at an all-time low.
Historically, the Atlanta market has strong sales in the spring and early summer. The market starts to slow in July, August and September. In October, we typically see a noticeable jump and then the market slows again through the holidays. Mortgage rates have historically seen a similar pattern and we expect them to drop further later this year with increased Fed action. Smart Numbers reports that "days on the market" plus expired and withdrawn listings are at all-time highs. This signals that sellers have gone through the denial and anger stages and are now accepting the fact that they need to improve the competitiveness of their property to sell it.
That means that - right now - is a great time to buy the right real estate in Atlanta. Supply is high, sellers are willing to make deals and mortgage rates are historically low.
So what affects home values over time and what are the odds that your investment in real estate will pay off in the future? Home prices are generally driven by supply and demand, population and job growth, costs of new construction and mortgage rates. Atlanta currently has an overabundance of supply. Single family homes currently show over 13 months of supply. That said, new homes starts are significantly lower so the current excess supply is expected to be absorbed in the next 12- 18 months. This is why - listen to these trends on Atlanta.
Atlanta has an incredible future. Our economy is strong and diversified. We have an active and business-friendly government. Hartsfield-Jackson airport is an incredible asset which allows passengers to reach more places in the world quicker than any other metropolitan area.
· Atlanta created 60,000 new jobs In 2006 - 3rd in the nation. (Bureau of Labor Statistics)
· Atlanta has the highest percentage increase of new millionaires - 1st in the nation. (Claritas)
· Atlanta is the #1 destination for young professionals. (Geolytics & U.S. Census)
· AARP rated Atlanta as the best city for baby boomers & seniors to live.
· In the last 6 years, Atlanta added more people than any metro in the nation. (Fortune)
· Fortune magazine says that Atlanta is expected to add 2 million more by 2020 - roughly the size of Denver.• The Census Bureau and Virginia Tech released a report that says that in the next 25 years, Atlanta will be the center of a "Megapolitan" cluster of over 7 million people.
Atlanta has been a national leader in housing starts for the past 10 years with over 70,000 new home starts in 2006. The costs of lumber, concrete, land, development and labor are expected to increase - causing the average cost per square foot of a home to rise. Housing starts in 2007 are considerably down and the forecasts for 2008 and 2009 are also lower.
Mortgage rates remain historically low. The recent fed cuts have not yet translated to long-term rates that help lower mortgage rates - but we expect rates to go lower for the remainder of the year.
Additional action by the Fed is likely.
CNN recently rated Atlanta as the leading large metro and the 4th city overall that is poised for a real estate "bounce back" in 2008 and 2009. Atlanta is a great place to buy "the right" real estate. That is why Donald Trump is building Trump Towers Atlanta. That is why many wealthy individuals are buying and investing here. They see the next wave coming and are smart enough to buy ahead of the wave when prices are lower. And we wonder how the wealthy get wealthier?
The Right Choice For Buyers:
Real estate investors make the highest returns by making the right choice in selecting an expert to advise them through the process. We have provided a perspective on the national market and the general Atlanta market. However, the submarkets locally can be very different. Areas of town, neighboring communities, homes on different streets or individual homes can have very different investment values. Donald Trump does not buy real estate by himself. He finds an expert, who knows their local market, is a great negotiator, knows real estate contracts, knows property valuations and delivers great client service.
The facts tell us that right now is the right time to buy "the right" real estate in Atlanta. There is an abundance of inventory, sellers are motivated, mortgage rates are historically low and the long-term trends for future values are excellent.
The Right Choice For Sellers:
For sellers, this type of market requires a different approach. Buyers are comparison shoppers. When there are many opportunities, buyers only want to consider the best opportunities. They will not waste time on properties they perceive to be overpriced, in need of significant repairs or that require upgrades. In a buyer's market, your value proposition must be clear and compelling.
So.... let's be thankful this Fall. There is much to be glad for. Your blogging friend, Bill
Re-Source Realty Brokers, Inc.
I specialize in commercial transactions and representing professionals in the purchase and sale of homes. With more than 30 years of legal experience, and 17 years of Brokerage, I can get the job done. Emory University (1968), University of Georgia School of Law (1973). Member National Association of Realtors, Georgia Association of Realtors, Atlanta Board of Realtors, Atlanta Commercial Board of Realtors, FIABCI (International Association of Real Estate Professionals), AGREE ( Association of Georgia Real Estate Exchangers,) Georgia Association of Real Estate Investors, National Association of Property Managers