The latest Case-Shiller Index was published on October 30, 2012. As always, the index reports on data 60 days in arrears. Therefore, the index reports Metro Atlanta home values for August 2012. So what does the latest index show and what does that mean for home values in metro Atlanta?
Things are improving in our market however two important considerations must be taken into account. First, the Case-Shiller index of home values is very different from average sale prices or median homes prices. The Case-Shiller Index reports on repeat properties sold and other factors, which are generally better indicators of home values. Second, this index reflects the average home values for all of Metro Atlanta.
Remember, real estate is local and every market is different. There are some local communities that have held their values reasonably well and others that may continue to decline. In fact, some homes entering the market are getting multiple offers and closed prices above list price. Your local Prudential Georgia Realty agent can help you understand the specific metrics in your local market. However, the Case-Shiller Index is a good general indication on what is happening in our market.
Now for the news…. Nationally average home prices have increased by 2% in the August Index when compared to the previous month of July for the 20-City Composite report. The August index for Atlanta shows a 1.75% (non-seasonally adjusted) increase in home values from July 2012, which is very good news. That represents a 15.15% increase in home prices over the past five months. While these numbers are positive, we must bear in mind that home prices had dropped 23.19% over the prior 8-month period. For all of 2012, homes values in Atlanta are up 9.6% but remain down 29.8% from the peak of July 2007.
The current Case-Shiller index reflects values similar to home values in the spring of 1999. The August index for Atlanta is 95.80, which is up 1.75% from July 2012 and down 6.12% from August of 2011. Atlanta continues to show the largest drop in 2012 home values compared to 2011 home values for any of the 20 markets tracked by Case-Shiller.
The Metro Atlanta real estate market continues to show signs of improvement for sellers. Listing inventory is down 36.8% from September of 2011 and down 51.9% from September 2010. That represents a 4.9 month supply of inventory based upon the latest closed sales trend. Six months supply is considered normal. We have seen an extended period of low inventory since last year. Buyer activity remains strong. In 2012, Trendgraphix reports closed sales up 12% compared to the same period in 2011. At the same time, the pace of pre-foreclosures (notices of default) and foreclosures has slowed. RealValuator reports that market sales (resales, new homes) are outpacing bank-owned sales. Would be happy to help show you the specific conditions in your market so you can make the best real estate decisions.
Click on the link below to open the Excel spreadsheet that shows the details of the latest index:
We have now seen five months in a row of positive results from the Case-Shiller Index. We expect to see a similar pattern for the reports that reflect September and October. Going into the late fall and winter months, we may see results that are flat or slightly negative. We are moving back to a more normal seasonal pattern where the spring and summer months are the heaviest selling months. View the graph of the latest Case-Shiller results from 2010, 2011 and 2012:
Demand from Buyers: We finished 2011 with over 70,000 homes purchased – a 20% increase from 2010. The activity is very strong so far in 2012 with closings up 12% from 2011.
Mortgage Rates/ Credit Availability: Average mortgage rates in the past 50 years were 8%. We expect to see historically low mortgage rates continue now that the Fed is purchasing $40 billion of mortgage-backed securities each month. But this stimulus to keep rates artificially low will not last forever. Freddie Mac and the Mortgage Bankers Association predict mortgage rates to rise to over 4% in 2013. In 3-5 years, we expect to see rates in the 6-8% range again.
Supply/ Inventory Levels: Most of our markets are showing inventory levels down well over 30% from the prior year levels. We see investors very active under $200,000 which will substantially shrink that inventory. New homes will continue to grow but not fast enough to have a significant impact on inventory levels. As values begin to rise, we expect “sideline sellers” to get back into the market. Overall, the “for sale” inventory will remain low compared to normal levels.
Competition from Short Sales/ Foreclosures: In 2011, short sales and foreclosures were over 60% of the transactions sold. In 2012, this activity is down 50% from last year. We are now seeing resales and new homes outpace the sales of bank-owned properties. We expect to see some “shadow inventory” coming in late 2012 and early 2013. However, most of this will be concentrated in specific areas and lower price points.
You and your agent should be carefully watching the trends for short sales and foreclosures. The policies that streamline short sales will continue to impact our market. The good news is that these policies will help us get through our supply of distressed properties faster. The bad news is that these properties tend to be sold below market value which will keep appraisals and the overall market prices lower than normal. Yes, we will continue to see some ups and downs along the way, but home values will rise over time. In 5 or 10 years, many will look back and regret not buying their dream home when they had the chance! Check back for our next posts with the latest facts and insight that can make you money!
Information as reported by our Prudential Georgia Realty company blog the Atlanta Scoop Blog!