Data released by the Georgia MLS shows that the housing market in Metro Atlanta is still pushing ahead, despite any rumors of an economic slowdown or lack of inventory under $300,000. 

The data shows that the average residential sales price was up 4.54 percent over last year and is right around $291,779. Activity in September was up 3.94 percent over activity last year — or 292 more homes were sold in September this year than the same month last year. 

Home values for houses listed under $300,000 have been rising fast, exacerbating a problem of affordability in the metro area. Due to high land prices and higher construction costs, it has been hard for builders to develop houses in this price-range and turn a profit. A recent article in the Atlanta Business Chronicle talked about how developers have pretty much hit the limit in terms of how far outside of Atlanta they are willing to build, and are instead trying to pack more units on fewer acres on smaller lots closer inside the metro area. 

For years, developers were able to buy up hundreds of acres at a time and develop 500-plus-unit communities. Undeveloped, or underdeveloped, land was less expensive and more plentiful. Now, they seem to be going back to the lots that were developed during that wave for a remodel, buying lots at higher prices and trying to pack higher densities into them in order to make the numbers work

There are some outliers. According to another ABC article, a developer is proposing a 178-home community on 119 acres near Dacula. Just north of that another wants to build a 191-home subdivision on 80 acres. And closer in near the Mall of Georgia, a developer is proposing 245 homes on 58 acres, and another is proposing 171 homes on 32 acres in Lawrenceville. Ashton Woods is using 145 acres of a former golf course along the Chattahoochee River in Duluth to propose a development with 161 townhomes and 302 single-family homes. 

But the competition for housing under $300,000 still seems to be strong. And when there is high demand and low inventory, prices go up. So that’s pushing houses that may have been more affordable a few years ago into higher price ranges and out of reach for some people. In the mortgage business, we have different ratios for the various loan programs. For a Fannie Mae/Freddie Mac loan, the typical debt-to-income ratio for a home needs to be under around 45 percent (you can go higher in a lot of cases)

This ratio is for the most part, the most important ratio in determining how much house a borrower can afford. What that means is, we add up all of a borrower’s minimum monthly debt payments, which includes car payments, minimum credit card payments, any student debt payments, etc. Then we take that number, add it to the proposed full mortgage payment and divide it by the calculated monthly income. For Fannie and Freddie, we want that to be under 0.45, or 45 percent. So to afford a $300,000-loan, a typical borrower with a total monthly debt-load of about $500 (which is probably low for the average borrower), would have to have an income of over $67,000 a year. 

With that said, we still have over 60,000 people a year moving the metro Atlanta area. And they all need places to live. The demand is only increasing, especially for housing under $400,000. So without a serious downturn in the economy, it isn’t likely that demand for that kind of housing is going to decrease anytime soon. So we can expect home values in that price range to keep rising. 

Geoff Smith is a mortgage banker with Assurance Financial focusing on residential home loans for refinances and home purchases. 

Geoff Smith

770-674-1433

Personal: NMLS#104587

Business: NMLS#70876

*The views and opinions expressed in this column do not necessarily reflect the views of Assurance Financial Group

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