After reading the following article it was so informative that I just had to pass this good info along. It is quite a long read so I've highlighted (in bold) some of the key elements to pay attention to. So, as you can see after reading below, the Real Estate market isn't as bad as the media is making it out to be !
Sorting Out Atlanta's Housing Market
by Seth Weissman and Dan Forsman
While the sky may be falling in other housing markets, it is certainly not falling in Atlanta's. However, the old saying that all real estate markets are local has certainly gotten lost in the shuffle of the bad news coming out of our national press.
A housing bubble definitely existed in some housing markets in the United States and we are now paying the price for that bubble having burst. According to the National Association of REALTORS®, between 2001 and 2006, housing values doubled and tripled in parts of Florida, California and Nevada. While the thought that housing values in these markets may now fall anywhere from 10% to 40% sounds scary, the reality is less so when you put it into context. If a house in Las Vegas worth $500,000 in 2001 was worth $1,200,000 in 2006, even a 30% decline in value leaves the house today worth $840,000. That rate of appreciation is none too shabby for buyers in these markets if they purchased in 2001. Unfortunately, if you purchased at the peak of the market in 2006, you would not now be in the best shape. Of course, this is only the case if you have to sell your property in a down market. If you do not have to sell, you have not gained or lost anything other than possibly your sense of financial well-being.
Atlanta's real estate market never had the kind of run-up in prices seen in bubble markets. Between 2001 and 2006, our home prices increased by a much more modest 30% or so. This means that a $200,000 house in 2001 was likely worth $260,000 in 2006. While this $60,000 increase in value may not seem like much over five years, as a rate of return on the cash investment most buyers put into their properties, it is quite significant. The point is that housing is still a tremendous long term builder of wealth for those who can stay put in their homes for awhile and ride out the periodic ups and downs in the market.
The bubble markets where prices skyrocketed are now seeing the greatest price declines. Housing markets like Atlanta's where the prices increased at a more normal rate are seeing much smaller price declines. For all the bad news, home prices in the Atlanta region have only fallen around 4.8% over the last year (according to the S&P/Case Shiller Index) as compared to other markets where prices have been in a free fall.
While the number of overall home sales has fallen dramatically in our region over the past year, home prices should not fall anywhere near as much. There are two reasons for this. First, while housing is a commodity with an investment value, it is also a place where people live. The majority of home moves are discretionary. If the market is unfavorable to make such a move, buyers and sellers considering a discretionary move simply sit it out on the sidelines. This can cause a decline in the number of homes sold without having much of an effect on prices. The second reason home prices in the Atlanta region are somewhat immune to a larger price drop is that our metro area has a safety net that does not exist in most other metro areas. Specifically, according to Metro Atlanta Chamber of Commerce statistics, our metro Atlanta region adds about 150,000 people per year 60% of whom move here. Between 2000-2006, our region added 856,266 people, a growth rate that was the highest in the nation. Some two million additional people are expected to move here over the next 12 years. That's the equivalent of the entire city of Denver relocating to Atlanta during that time frame. With so many new families moving to our region, the demand for housing will remain strong and prices will continue to appreciate.
Even with slightly more than 100,000 homes on the market today it won't take long for that inventory to be absorbed based on our current rate of growth. This is particularly the case since the number of new homes being constructed in our region is falling so dramatically. Since the fourth quarter of 1994, permits for new homes are down almost 60% according to the Greater Atlanta Homebuilders Association.
Homeowners who see that their homes are worth less than they were a year ago often feel poor and have a hard time selling their homes for less even though they can get an equally good deal in purchasing another home. It's the same logic that causes investors to hold onto an underperforming stock rather than cutting their losses and investing in a stock with a greater likelihood of outperforming the market. However, savvy sellers who can overcome their angst and see the big picture have a great opportunity to presently improve both the location and quality of their housing investment.
The two wildcards in our housing market are foreclosures and the ability to get mortgage financing. While there have been irresponsible lending practices in the mortgage market over the last decade, it is still surprisingly easy to get a mortgage today if you have decent credit. Good credit appears to even be trumping the lack of a large down payment. Like it or not, buyers with bad credit have been shoved out of the market and this is and will dampen sales in some markets. The effect of this will not, however, be uniform and will disproportionately affect areas with large numbers of starter homes that buyers with marginal credit purchase often purchase.
In 2001, the foreclosure rate for the metro Atlanta region was a 1.1% of all homes. By the end of 2007, that rate had increased to 2.7%. Moreover, recent reports indicate that 6% of all mortgages in Georgia statewide were over 30 days past due. While foreclosures will stress our market, it must be remembered again that our region, just like our nation, is also not a monolithic housing market. Some local housing markets within our region are doing far better than others and will continue to do so. Foreclosures are by no means evenly disbursed but are unfortunately, concentrated in certain neighborhoods and locations within our region.
While irresponsible lending practices played a huge role in the high number of foreclosures, mortgage fraud also accounts for a larger part of the problem than most experts like to admit. The U.S. Department of the Treasury reported that between 1997 and 2005 mortgage fraud increased by 1,411%. For several years running, Atlanta led the nation in instances of mortgage fraud. Billons of dollars were literally stolen from investors in these mortgages leaving numerous foreclosures and devastated neighborhoods in their wake.
What will the future bring? Housing in areas without large concentrations of foreclosures and starter homes should be seeing housing prices stabilizing as demand catches up with supply.
As crazy as it may seem, there may even be a shortage of housing in desirable areas over a 3-5 year window if the number of new housing starts does not increase. Areas hard hit by foreclosures and mortgage fraud will unfortunately limp along and in some cases may never recover from the excesses and abuses of the last seven years. The difficult challenge for government over the next decade will be to figure out how to restore health to neighborhoods where housing demand was artificially created through lending abuses and fraud. Hopefully, there will be unique opportunities to absorb this excess supply for decent affordable work force housing in the metro area. If this does not occur rich neighborhoods will likely get richer and the poor neighborhoods will likely get poorer.
As REALTORS® like to remind people, smart housing decisions tend to boil down to a focus on location, location, and location. Buying in a good location will always pay dividends over the long haul. While there are many factors that make a neighborhood desirable, some of the more important ones include good schools, low tax rates, good access to work centers and shopping and low crime rates.
Demographic changes are also reshaping our region's housing and re-defining somewhat what is considered a great place to live. Our city is urbanizing at a remarkable pace. This is driven by the three horsemen of traffic congestion, an aging population and changes in consumer preferences.
While there are a lot of condominium units presently on the market in Atlanta, there was a reason that all of those condominiums were built in the first place - they were filling (and will continue to fill) a demand at either end of the demographic spectrum. Condominiums are perfect for aging baby boomers seeking to downsize and enjoy maintenance free living. They are also the housing of choice for busy young professionals who in many cases cannot yet afford single family homes in intown neighborhoods. While developers may have gotten a bit ahead of themselves in developing mixed-use and condominium developments, the smart money is still on the long term demand for this type of housing growing exponentially.
Residential real estate markets have always been cyclical. The only difference this time around is that the sizes of the swings have been larger and the scope of the downturn has been national rather than limited to certain niche markets. Housing prices will recover and in a few years, due to the health of our economy, will likely be much higher than prices at the peak of the previous cycle.
A strong buyer's market and low interest rates are allowing buyers who buy now to get unbelievable deals. As the spring market starts to gain momentum, some of the best deals will be gone. The advice of "buy low, sell high" has never been more apt than at this time in Atlanta's housing market.
Atlanta and Dallas (the other city benefiting from huge population increases) will likely lead the nation out of the real estate recession. It is always darkest right before the dawn. Dawn is breaking in many segments of our market and buyers should act accordingly.
Seth Weissman is a senior partner in the law firm of Weissman, Nowack, Curry & Wilco, P.C. and serves as general counsel to the Georgia Association of REALTORS®. Dan Forsman is President and CEO of Prudential Georgia Realty.
If you are interested in selling your existing home and finding one of these great deals that are available today, contact me for a free consultation. ~Lorrie Thomas