A couple weeks ago I talked about the housing market being a little Jekyll and Hyde, with lower-priced houses being in a sellers’ market and higher-priced houses being more in a buyers’ market. That article was more me going off articles I’ve been reading and gut-feelings. This one is about hard data.
I turned to my friend Mitchell Palm with Smart Real Estate Data. Their company is based out of Atlanta and is one of the best resources for crunching local numbers, to the point of sometimes dialing those numbers down to specific neighborhoods. I asked him about my theory, and he didn’t waste two seconds before sending me data and graphs proving out that he had known for a while what I was just discovering.
Palm uses months of inventory to determine whether a market is a buyers’ market or a sellers’ market. Months of inventory is the estimated number of months it would take to sell all of the houses currently listed in a given market. He said six months of inventory is what experts consider a healthy market, and that is what he says is the dividing line between the two markets.
“We know that 81 percent of listing are under 6 months, or 81 percent of the homes for sale are considered to be in a sellers’ market,” he said. “Once you reach beyond the $600,00 price-range the (inventory) levels rise exponentially.”
The healthy market seems to be in the $600,000 to $800,000 price-range for the metro area. In that range, there is about seven months of inventory. But you start to go over that and those houses are sitting much longer. Houses listed over $1 million are sitting for almost a year, and those over $1.5 million are sitting for over a year and a half.
On the flip side, the lower you go in price, the number of months on the market shrinks rapidly. Anything under $300,000 has two months of inventory, and two months of inventory is considered very unhealthy. In that price-range, buyers are fighting for the same houses, which is driving prices up and exacerbating the problem.
There is a problem in Atlanta with what some call affordable housing. A significant percentage of the market wants to buy houses under $300,000. But over the last eight years, land has been so expensive, that builders have not been able to afford to buy the land and build houses in that price range and still make a profit. So there hasn’t been a lot of inventory added to the market. Now you have a lot of people fighting over the affordable market, and that is driving up prices on those homes, making them less affordable.
I live in Roswell and was eating at a restaurant. From the time we ordered our food to the time it arrived was 45 minutes. The manager apologized and I asked him what the problem was. He said his turnover with chefs is so high because none of them can afford to live in North Fulton and are having to drive an hour to get to work there. And it’s not worth it to them. It’s really strange how these things play out in our day-to-day lives.
But inventory in those lower-priced markets is in trouble. If you are trying to buy a home priced from $100,000 to $200,000, there is only one month’s worth of supply. If two months is considered very unhealthy, one month is half of that.
Palm said closings were slightly down over the last year, and he said there were two reasons for this: “sky-rocketing housing prices and rising mortgage rates — both of which lead to lack of affordability,” he said.
That said, we’ve seen a dramatic decrease in rates over the last month shoving them back down just under 4 percent for a 30-year fixed mortgage, according to MortgageNewsDaily.
“The falling mortgage rates should be the saving grace for the busy summer buying season of 2019,” Palm said.
Geoff Smith is a mortgage banker with Assurance Financial focusing on residential home loans for refinances and home purchases.
*The views and opinions expressed in this column do not necessarily reflect the views of Assurance Financial Group